RESIDENTIAL
August - September 2021
Further P mortgage restrictions coming as house price growth continues The Reserve Bank of New Zealand has announced plans to tighten mortgage lending standards, with the latest CoreLogic data showing nationwide property values increased by 1.8% over July
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roperty price growth has not slowed since June, which recorded the same 1.8% increase. While this is down on both May (2.2%) and April (3.1%), CoreLogic NZ’s Head of Research Nick Goodall says a market this size can take some time to slow. “In order to prevent this problem from getting worse, the Reserve Bank will be consulting on a proposal to further reduce the amount of high LVR lending to owner-occupiers,” Deputy Governor and General Manager for Financial Stability Geoff Bascand says. “We propose to restrict the amount of lending banks can do above an LVR of 80 percent to 10 percent of all new loans, down from 20 percent at present. We will begin consulting on this change later this month with a view to introducing it from 1 October 2021. “We also intend to consult in October on implementing Debt-to-Income (DTI)
restrictions and/or interest rate floors in an effort to provide further comfort that borrowing is sustainable. Introducing DTIs will take longer, whereas the banking industry has informed us that interest rate floors could be implemented more quickly. “Consultation will be focused on operational feasibility and possible calibration of these tools, including their impacts on investors and first home buyers,” Bascand says. “We are focussed on ensuring borrowers are resilient to a range of future economic and financial conditions. We are particularly concerned about those who have borrowed in the past 12 months at high LVRs and high DTIs. “If house prices were to fall, some buyers could face the possibility of negative equity – which means the value of their property is below the outstanding balance on their mortgage.
