NZ Mortgage Rates Set To Rise

5 months ago John Abercrombe Comments Off on NZ Mortgage Rates Set To Rise

The Reserve Bank of NZ has asked the Minister of Finance, Bill English, to agree to add a Debt to Income (DTI) tool to the Memorandum of Understanding on macro-prudential policy.

“New restrictions on lending to property investors with high loan to value ratios (LVRs) came into force on 1 October. These restrictions, along with the earlier LVR restrictions, are increasing the resilience of bank balance sheets to a downturn in the housing market,” RBNZ Deputy Governor, Grant Spencer, said.

“While the bank is not proposing use of such a tool at this time, financial stability risks can build up quickly and restrictions on high-DTI lending could be warranted if housing market imbalances were to deteriorate further,” the central bank said in its just released Financial Stability Report.

“However, the share of bank mortgage lending to customers with high DTI ratios has been increasing and this could increase the rate of loan defaults during a housing downturn.

“The banking system has strong capital and funding buffers and profitability remains high. Despite being relatively concentrated, New Zealand’s banking system also appears to be operating efficiently from an international perspective based on metrics such as the cost-to-income ratio and the spread between lending and deposit rates

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