DTIs will have no significant impact on house prices immediately

It has started consultation on setting the DTI policy to allow banks to lend 20% of their residential loans to owner-occupiers with a DTI greater than six and 20% of their residential loans to investors with a DTI greater than seven, while loosening the LVR ratios to allow to allow 20% of owner-occupier lending to borrowers with an LVR greater than 80% and 5% of investor lending to borrowers with an LVR greater than 70%.

These settings mean that banks cannot lend more than 20% percent of their lending to owner-occupiers with a DTI greater than 6; and 20% of investor lending to investors with a DTI greater than 7.

Allowing 20% of lending above the proposed DTI thresholds will help minimise potential efficiency costs by giving banks discretion to offer loans to high-DTI but otherwise creditworthy borrowers or for complex cases where a DTI cannot be easily determined.

The RBNZ is proposing to activate DTI restrictions from the middle of this year. This is the earliest date possible following this consultation, allowing time to consider the feedback, and to make final decisions, and for the banks to implement the new restrictions.