Lending could get harder
Pedersen says the RBNZ’s soft implementation of DTI restrictions won’t have too much impact due to high interest rates and the test rates banks already use mean many borrowers already struggle to qualify.
“As interest rates drop, the test rates will also track down and there will be a point where DTIs will become the handbrake.”
Under the new restrictions trading banks will be able to lend six times a borrower’s gross or pre-tax income on a residential owner-occupied property and seven times that of an investor.
However, they will be able to make 20% of new owner-occupier lending to borrowers with a DTI ratio over 6 and 20% to those over 7. At the same time, LVRs will be eased to let banks make 20% of owner-occupier lending to borrowers with an LVR over 80% and 5% of investor lending to borrowers with an LVR above 70%.
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