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Last Article Uploaded: Wednesday, October 27th, 6:26PM

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Debt-to-income limits move closer

Debt-to-income limits on lending have moved a step closer to reality after the Reserve Bank added debt serviceability restrictions to its policy toolkit.

Wednesday, June 16th 2021, 10:41AM 1 Comment

In February, the Government asked the RBNZ to conduct analysis on the merits of DTIs amid soaring house prices.

The Reserve Bank has released its advice to the minister today.

According to the central bank, DTIs "are likely to be the most effective additional tool that could be deployed by the Reserve Bank to support financial stability and house price sustainability".

The Reserve Bank has concluded that DTIs "would impact investors most powerfully while having limited impact on first home buyers".

It also concluded that a DTI limit would be a complementary tool to loan-to-value restrictions, "as they address different dimensions of housing-related risk; DTIs reduce the likelihood of mortgage defaults while LVRs largely reduce losses to banks if borrowers default".

In response to the RBNZ guidance, the Finance Minister has added debt serviceability tools to the Reserve Bank's policy toolkit, on the condition that implementation is designed to avoid an impact on first home buyers.

The RBNZ will work with Treasury to update its memorandum of understanding.

Reserve Bank governor Adrian Orr said "Although we do not have a remit to target house prices directly, our financial policy tools can help to ensure prices do not deviate too far from sustainable levels.

"We believe that a 'sustainable house price' is the level that the price would be expected to move towards over several years, reflecting the underlying drivers of supply and demand for housing, including population growth, building costs, land supply, and interest rates."

The Reserve Bank will discuss the feasibility of DTIs in a consultation over the coming months, along with a regulatory impact assessment.

The step closer to DTIs is the latest blow to investors following the Government's radical housing reforms. 

Landlords have been hit with an extension to the bright-line test, and the planned removal of deductibility of interest payments, as ministers look to crack down on investor activity.

Tags: DTIs landlords Lending property investment RBNZ Reserve Bank

« Propser and mySolutions team upReserve Bank cools on interest-only limits »

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Comments from our readers

On 16 June 2021 at 3:22 pm Amused said:
The Reserve Bank has concluded that DTIs "would impact investors most powerfully while having limited impact on first home buyers".

Who's using the Reserve Bank brain cell at the moment? Robertson appears to at least grasp what DTIs would do to first home buyers but the academics at 2 The Terrace Wellington clearly haven’t got a clue!

Remember these are the same geniuses that have forced interest rates too low encouraging investors to pull their money out of the banks and switch to property investment. And we wonder why house prices are now out of control?

At some point New Zealanders have to wake up and realise that the people in charge at the Reserve Bank currently don’t know what they are doing.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▲3.25 ▲3.75 ▲3.99
ANZ 4.59 ▲3.84 ▲4.30 ▲4.54
ANZ Blueprint to Build 1.68 - - -
ANZ Special - ▲3.24 ▲3.70 ▲3.94
ASB Back My Build 2.04 - - -
ASB Bank 4.45 ▲3.25 ▲3.75 ▲3.99
Basecorp Finance 5.49 - - -
Bluestone ▲3.74 ▲3.54 ▲3.89 ▲4.09
BNZ - Classic - ▲3.24 ▲3.79 ▲3.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.70 ▲3.84 ▲4.39 ▲4.59
BNZ - TotalMoney 4.70 - - -
CFML Loans 5.15 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 ▲4.10 -
Credit Union South 5.65 3.95 ▲4.10 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC ▲4.15 ▲2.89 ▲3.29 ▲3.49
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 4.00 ▲4.14 ▲4.44 ▲4.84
Kiwibank - Offset 4.00 - - -
Kiwibank Special 3.75 ▲3.29 ▲3.59 ▲3.99
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 3.05 3.45 3.75
SBS Bank Special - 2.55 2.95 3.25
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▲2.79 - -
The Co-operative Bank - Owner Occ 4.55 ▲2.99 ▲3.60 ▲3.89
The Co-operative Bank - Standard 4.55 ▼3.49 ▲4.10 ▲4.39
TSB Bank 5.34 ▲3.75 ▲4.20 ▲4.44
TSB Special 4.54 ▲2.94 ▲3.40 ▲3.64
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.84 ▲3.79 ▲4.39 ▲4.59
Westpac - Offset 4.84 - - -
Westpac Special - ▲3.19 ▲3.79 ▲3.99
Median 4.57 3.24 3.70 3.99

Last updated: 27 October 2021 8:49am

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