New Zealand’s central bank said on Friday it would maintain its current mortgage loan-to-value ratio (LVR) rules, after weighing house prices, financial strain among existing borrowers, and the resilience of the banking system.
The Reserve Bank of New Zealand’s Financial Policy Committee retained restrictions in place since December: banks may issue up to 25% of new owner-occupier loans with LVRs above 80%, and up to 10% of new investor loans with LVRs above 70%. In practice, that keeps the deposit thresholds for low-deposit borrowers where they were — the rules are designed to limit how much of banks’ mortgage books can go to smaller-deposit borrowers, curbing exposure to a sharp housing correction. Debt-to-income restrictions also remain in force.
“We review settings annually to ensure they remain appropriate given housing market conditions and financial stability risks,” RBNZ Assistant Governor for Financial Stability Angus McGregor said in a statement. He added that “housing risks are currently contained,” with mortgage lending growth modest and the share of higher-risk lending manageable.
Housing remains a drag on New Zealand’s uneven economic recovery: the latest Real Estate Institute of New Zealand data showed national house prices broadly flat, extending a prolonged period of weak growth that has weighed on household wealth, spending and confidence, as well as residential construction — even as new dwelling consents have risen over the past year.
The RBNZ said its next review of the LVR settings is expected in around 12 months, though it could be brought forward if conditions warrant.
References
The Business Times (Reuters) – New Zealand’s central bank to maintain current home lending rules
