RBNZ plans to ease restrictions on higher-risk housing loans
Relaxation of the restrictions comes as the housing market has languished, with prices dropping to a two-year low in August
[WELLINGTON] New Zealand’s central bank will allow lenders to make more higher-risk housing loans from December in a potential boost to the property market.
The Reserve Bank of New Zealand (RBNZ) will ease mortgage loan-to-value ratio (LVR) restrictions from Dec 1, it said on Tuesday (Oct 14)y in Wellington. The decision follows a review of broader macroprudential settings since the introduction last year of additional lending limits based on a borrower’s income.
“We concluded that the introduction of debt-to-income (DTI) restrictions last year means LVR settings can be less restrictive on average,” said acting assistant governor financial stability, Angus McGregor. “This includes looser default settings that we expect will be in place most of the time, except for when risks are particularly elevated.”
Relaxation of the restrictions comes as the housing market has languished, with prices dropping to a two-year low in August. Despite falling home-loan interest rates, buyers have stayed on the sidelines as weak economic growth and rising unemployment hurts incomes.
“Easier LVR settings will give banks more flexibility to lend, improving market efficiency and access to credit, particularly for first-home buyers,” said McGregor.
The new limits will allow banks to raise the share of new loans to owner-occupiers with less than a 20 per cent deposit to 25 per cent from 20 per cent currently. In addition, banks will be able to now allocate 10 per cent of new loans to investors with less than a 30 per cent deposit, up from 5 per cent.
The RBNZ said that the new levels are its default position, and it will review them annually to gauge their appropriateness.
“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder,” Finance Minister Nicola Willis said. She welcomed the move, noting it should benefit first-home buyers. BLOOMBERG
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