About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Tuesday, November 19th, 6:12PM
rss
Latest Headlines

No case to end LVRs – S&P

There is no case for the Reserve Bank to relax the LVRs as the housing market remains a risk to New Zealand’s banking system, according to Standard & Poors.

Thursday, September 14th 2017, 1:08PM

by Miriam Bell

In a new update on New Zealand’s banking sector, the credit rating agency said risks stemming from rising house prices and household debt levels have stabilized in 2017.

But housing-related downside risks remain elevated and the unwind of both house prices and credit growth has some way to run before the risks subside.

S&P’s director of financial institutions ratings, Nico de Lange, said that house price growth has slowed down noticeably in the past year including, importantly, in Auckland.

That’s due to a number of factors including the Reserve Bank’s third round of LVRs, a tightening bias from the banks, affordability and serviceability issues and interest rate repricing.

De Lange pointed to the LVRs as the key contributor to the slowdown in housing – which is behind a wider slowdown in credit growth.

“But the strong build-up in imbalances in both credit growth (relative to GDP) and house prices (relative to income) have to unwind further before housing related risks stop posing a threat to the financial system.”

This means that the time is not right for the Reserve Bank to start removing the LVRs.

S&P’s associated director financial institutions ratings, Andrew Mayes said they believe the slowdown in both housing and credit growth will continue.

Macro-prudential tools, like the LVRs, are targeting the wider risk to the financial system – not just the housing market, he said.

“We feel that an unwind in the build-up of risks from housing, which remain elevated, hasn’t taken place yet.

“From where we see things at the moment we would expect the LVRs to remain in place.”

Additionally, DTIs could be a useful addition to the Reserve Bank’s macroprudential toolkit, as they add serviceability into the equation which the LVRs don’t, Mayes said.

“But we are not sure when we will see developments in this space as no political party seems keen to endorse them.”

In the longer term, S&P does not expect to see house prices falling too much - unless there is a dramatic change to existing supply and demand dynamics – although credit growth should continue to slow.

Mayes added that funding cost pressures for banks are expected to remain and that is coming through in mortgage repricing.

“Costs have probably stabilised which means the headwinds have come off and we could see a cut in some rates.

“But we think that we will see some pressure on loan repricing going on for a while.”

Read more:

LVRs still needed – RBNZ 

PM rules out DTI ratio idea 

Tags: banks Lending LVR Macro Prudential Tools mortgages RBNZ Reserve Bank S&P

« HomeStart boost could drive prices upElection 2017: the housing round up »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • When is a client really a client?
    “And this subtle upgrade to the understanding of a complaint. Which changes the ISO definition from an expression of dissatisfaction...”
    1 day ago by JPHale
  • When is a client really a client?
    “Just released additional standards from the FMA. Record keeping potentially until 7 years after the death of the life...”
    1 day ago by JPHale
  • When is a client really a client?
    “@ReganT interesting that the two life advisers involved with the code working group discussion are the ones being argued...”
    1 day ago by JPHale
  • When is a client really a client?
    “In a previous reply I responded to the concept of payment as a trigger. I actually agree it’s not. While we don’t often...”
    2 days ago by regant
  • When is a client really a client?
    “Tash are you being deliberately obtuse? I didnt say you have to keep sending/giving disclosure every year, I said you have...”
    2 days ago by regant
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%

MORE QUIZZES »

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com