Uncertainty over DTI effects

Ireland and the UK have DTI caps of between three-and-a-half and four-and-a-half times income and in the UK banks can only advance up to 15% of the number of new mortgages at a DTI greater than 4.5.

Because New Zealand did not have DTIs during 2020 and 2021 when the RBNZ temporarily suspended LVR rules because of fears the pandemic would mean a plummeting housing market and wrecked economy, house prices actually rose 45% compared to increases of about 25-30% in Australia, Canada, the UK, US, Germany, Sweden and the Netherlands, Australian bank services firm Macquarie found.

It led to NZ’s housing market being dubbed the “canary in the coal mine” by overseas economists.

Kelvin Davidson says a case can definitely be made for DTIs here but it is difficult to know if they have worked in other countries.