RBNZ Prepared to Tighten Lending Further as House Prices Soar

By Bloomberg7 days ago

Bloomberg. Buildings stand in Auckland, New Zealand, on Wednesday, Sept. 16, 2020. New Zealands economy will endure a shallower recession than previously expected but the coronavirus pandemic will have a longer impact on the countrys finances, according to government projections.

(Bloomberg) -- New Zealands central bank said its prepared to further tighten mortgage lending restrictions if needed to rein in the countrys red-hot housing market.

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The Reserve Bank would use loan-to-value ratios or new tools currently under consideration to restrict the amount of money banks can lend for house purchases, the RBNZ said in its semi-annual Financial Stability Report Wednesday in Wellington. The bank will be watching how the property market reacts to recent government policy changes, it said.

If required, we are prepared to further tighten lending conditions for housing using LVR requirements or additional tools that we are assessing, RBNZ Deputy Governor Geoff Bascand said in a statement. A high proportion of new lending has had high debt-to-income and loan-to-value ratios. This makes recent borrowers more vulnerable to a rise in mortgage rates, and exposes households and the financial system to a decline in house prices.

The government has announced a raft of new measures to dampen investor demand for housing after prices soared more than 20% in the past year. It has also told the RBNZ to pay more attention to the housing market when setting policy.

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