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Next phase of RBNZ review likely to assess DTIs

The Reserve Bank of New Zealand has confirmed the second phase of a review into the Reserve Bank Act will look at its macro-prudential toolkit, likely to include debt-to-income ratios for home loans.

Thursday, June 7th 2018, 5:26PM

by Dan Dunkley

RBNZ announced the details of the second phase of the Reserve Bank Act review this afternoon. It will look at a wide range of items including the bank's governance, supervision and enforcement, crisis management, and funding.

Yet the mention of the Reserve Bank’s macro-prudential toolkit will raise alarm for mortgage advisers. Over the past few years, figures within the Reserve Bank have called for the bank to look at new ways of assessing borrowers’ ability to repay loans. Suggestions have included controversial debt-to-income ratios, or DTIs.

DTIs has been widely dismissed as a crude tool that does not accurately reflect a customer’s ability to repay a loan. Used on their own, they fail to take into account the size of a borrower’s deposit, for example.

New Zealand's major banks say their serviceability assessments are up to the task. Advisers say banks have moved to tighten servicing criteria over the past 18 months, partly due to the threat of new regulation, such as DTIs, to curb lending.

Last year, the Reserve Bank launched a consultation on DTIs but faced criticism from lenders. Responding to the consultation ANZ said DTIs were “unsophisticated” and did not "take into account individual borrower characteristics like after-tax income, household costs, other outgoings and the interest rate environment”.

Yet the Reserve Bank has continued to talk up the prospects of introducing DTIs. In March, acting governor Grant Spencer called DTIs  a “natural complement” to the current macroprudential toolkit.

RBNZ governor Adrian Orr is likely to be in favour of introducing DTIs to control lending. In the Reserve Bank’s recent Financial Stability Report, Orr said the bank was “positively pursuing” introducing DTI restrictions.  He has sent out mixed messages on the topic, however. In a recent interview with RNZ, Orr admitted DTIs were a “brutally blunt” way of controlling lending.

Tags: Adrian Orr DTIs RBNZ

« NZCU Baywide to offer 95% mortgagesASB, Westpac tweak servicing tests »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

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