Key backs off on first home buyer exemptions - a little
Key had previously said he would like the Reserve Bank to exclude first-home buyers from any moves to restrict high LVR lending, but he did not reiterate that position in a speech to Local Government New Zealand yesterday.
Reserve Bank governor Graeme Wheeler has indicated he did not agree with that view, because first home buyers make up about a third of low-equity lending that is done.
The move to LVR restrictions is primarily designed to increase the stability of the banking sector and Wheeler has said highly-leveraged first-home buyers could be vulnerable in the event of a house price collaps.
Key said that a solution would require a fine balance: “First-home buyers are a priority for the Government – that remains my view. It is worth however, putting some context around the actions the Reserve Bank is considering. Absent of any other alternative, then rapidly increasing house prices may see the Reserve Bank raising interest rates, which will affect everyone - all mortgage holders and businesses, whereever they are in the country, as well as the Government.
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