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Govt moves to cool housing market

The government is looking at formalising Reserve Bank proposals to rein in credit growth, including restrictions on loan-to-value ratios, Finance Minister Bill English said today.

Wednesday, February 27th 2013, 3:39PM 4 Comments

by The Landlord

In a speech to the Auckland Chamber of Commerce today, English said that over the next few weeks, the Reserve Bank will consult on its proposals to use more tools to help ensure financial stability.

Under these proposals, the Reserve Bank will have a greater ability to influence the amount of lending done by banks and other financial institutions.

This might include requiring lenders to: Hold additional capital on their balance sheet as a buffer during an economy-wide credit boom; hold additional capital against loans in specific sectors if risks emerge in those sectors; adjust their funding ratios to use more stable sources of funding to avoid the impact of short-term funding shortages, and; restrict high loan-to-value ratio lending in the housing sector.

“They will not be the answer to all problems created by excessive credit cycles,” English said. “But they will certainly help at the margins.” English said he didn't want to “prejudge” the consultation process today.

However, he said the Government is considering formalising the use of these tools to “avoid a strong upswing in asset values and any unsustainable growth in borrowing well in excess of economic growth.” He said since the Global Financial Crisis, the Reserve Bank has laid out new requirements to encourage banks to strengthen their balance sheets, in terms of both capital and liquidity buffers.

“After several years of discussion against the background of an international debate on the same issues, the Government will formalise the policy and ensure the decision making process is transparent,” he said. “As I’ve said, it is intended to help manage excesses in credit cycles, as occurred in the lead up to the Global Financial Crisis."

The Reserve Bank will be taking the proposals to the public for consultation next month.

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Comments from our readers

On 28 February 2013 at 9:57 am Andy said:
I wonder what the statistics are for consumer finance. To me it would seem logical to stop or curb consumer finance in return for promoting savings. If people had to save up for luxuries rather than putting them on HP or the plastic, balance sheets would improve, there would be less bad debts, and maybe even even up our balance of payments as imports of luxuries would stop in the short term.
This would encourage a better savings attitude amongst New Zealanders and promote more fiscal thinking rather than hogging "just because the neighbours have one"!
On 28 February 2013 at 10:05 am leanne said:
The government should not use Auckland as it's measure for the housing market. Auckland may as well be another country. The provinces are not doing so well. Perhaps the Reserve bank needs to formulate strategies specific to Auckland lending, and apply those solely to the Auckland province.
On 28 February 2013 at 10:22 am Stuart said:
I hope that if there are to be any LVR restrictions, that they are only applied to where the housing market is actually overheating, the obvious one being Auckland. Many/most parts of NZ are far from doing that.
On 28 February 2013 at 5:10 pm Hamish said:
Sounds like a good way to make it harder for first home buyers and cheaper for those people with massive deposits.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
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 - 7.14 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 7.74 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 - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 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 6.89 6.55 6.35
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 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
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 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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