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DTIs not needed right now - RBNZ

The Reserve Bank would not implement controversial debt-to-income ratios (DTIs) right now if it had them in its macro-prudential toolkit, the bank’s governor says.

Thursday, February 9th 2017, 2:03PM 2 Comments

by Miriam Bell

Questioning at the Reserve Bank’s Monetary Policy Statement (MPS) press conference Thursday morning kept returning to the prospect of DTIs being introduced as a curb on the housing market.

Reserve Bank governor Graeme Wheeler said that his preference would be to have DTIs as part of the bank’s macro-prudential arsenal already.

“A lot of countries have used DTIs successfully and they can be very helpful if managed well. But, there can always be unintended consequences.”

To that end, the Reserve Bank has done a lot of research, including collecting data from the banks, on DTIs and has talked to government about the possibility of DTIs being included in their toolkit.

Wheeler said that Finance Minister Stephen Joyce has made it clear that the government wants the bank to consult and be very clear about the costs and benefits of introducing that instrument.

“We are happy to do that. And we are happy to have clarity over the government’s position on DTIs.”

However, Wheeler emphasised that even if the Reserve Bank did have DTIs in its toolkit they wouldn’t necessarily use them at this point.

This is because the bank has been encouraged by what they have seen in terms of house price moderation over recent months.

There has been a significant slowdown in house price inflation, particularly in Auckland, but it remains to be seen if that moderation will continue, Wheeler said.

“If house price inflation picks up again and we felt we needed to act, but didn't have DTIs, we would have to look into our existing toolkit.

“We would have to look at if we wanted to tighten up on capital with the banks. We would have to look at LVRs, which have been successful to date, particularly in terms of improving banks’ balance sheets.”

One factor which could prompt renewed housing market pressure – and house price inflation – is the country’s ongoing record high net migration.

At this stage, research indicates the record numbers of migrants have not fed through to inflationary pressure in the way that high migration did in the early 2000s.

Wheeler said this was largely due to the composition of the migration flows. In this cycle there are more students and single people on working visas than there are families arriving.

The Reserve Bank will continue to keep a close eye on migration composition and its impact on the housing market.

But Wheeler said the Reserve Bank has always been clear they can’t take over ownership of the housing market problem.

There are a range of supply and demand issues at play, with supply being the big issue, he said.

“We have always said that increasing supply is the answer and we are seeing more supply coming on. Consents are at an 11 year high and that is significant. But more is needed.”

Issues around construction industry productivity and regulatory complexities are now coming into play, but Wheeler said he believed the government was aware of them.

Read more:

DTIs cost benefit analysis ordered.

Risks in new RBNZ proposal .

Tags: banks LVR Macro Prudential Tools RBNZ Reserve Bank

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Comments from our readers

On 10 February 2017 at 9:21 am MrKing said:
There are THOUSANDS of homes for sale in Auckland right now...supply is NOT the issue...IT is the OUTRAGEOUS deposits required...look $120,000 to get into a 3 brm cheaply built group home in South Auckland..no wonder renting garages or living in cars is the only option...far cry from when you could capitalise on family benefit for yo
your deposit eh?
On 13 February 2017 at 8:44 am LNF said:
Gareth Morgan warned some years ago that we would have a major housing issue. His point was that housing owners might think that they would benefit from the escalating prices, but the problem was that when you came to release the capital by selling - there would be no new buyers because the next generations could not afford to buy. The buying and selling would be between existing owners Well MrKing. Here we are

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ANZ 5.79 4.99 5.35 5.59
ANZ Special - 4.49 4.85 -
ASB Bank 5.80 4.85 5.14 5.49
ASB Bank Special - 4.45 4.74 5.09
BankDirect 5.80 4.85 5.14 5.49
BankDirect Special - 4.45 4.74 5.09
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.59 4.79 5.09
BNZ - Std, FlyBuys 5.90 4.99 5.19 5.49
BNZ - TotalMoney 5.90 - - -
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Credit Union Auckland 6.70 - - -
Credit Union Baywide 5.95 ▲5.45 ▲5.50 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 5.00 5.20 -
Housing NZ Corp 5.79 ▼4.85 5.14 5.49
HSBC Premier 5.79 4.09 4.29 4.89
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.70 4.59 4.69 5.09
Kiwibank 5.70 5.09 5.19 5.65
Kiwibank - Capped - - - -
Kiwibank - Offset 5.70 - - -
Kiwibank Special - 4.69 4.79 5.25
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.00 4.86 4.75 5.30
Lender Flt 1yr 2yr 3yr
SBS Bank 5.79 4.99 ▲5.29 ▲5.59
SBS Bank Special - 4.59 ▲4.85 5.25
Sovereign 5.90 4.85 5.14 5.49
Sovereign Special - 4.45 4.74 5.09
The Co-operative Bank - Owner Occ 5.75 4.59 4.85 5.25
The Co-operative Bank - Standard 5.75 5.09 5.35 5.75
TSB Bank 5.65 4.80 5.15 5.45
TSB Special - 4.55 4.75 5.15
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.84 4.99 5.29 5.59
Westpac - Capped rates - 5.15 5.25 -
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.84 - - -
Westpac Special - 4.59 4.85 5.09
Median 5.80 4.85 5.14 5.38

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