Spectre of mortgage levy looms

By Andrea Milner

The mortgage levy is being considered as a means to cool housing demand and inflationary pressures.

“I stress the concept of a mortgage levy is at a very preliminary stage,” Cullen says.

In a February 2006 report the Reserve Bank suggested the levy as one of a number of policy options to ease house price inflation and reduce the need for higher interest rates.

The bank proposed that an adjustable mortgage interest levy be imposed on to “force a wedge between the price paid for credit by mortgage borrowers and the returns available to the savers financing those loans”.

United Future leader Peter Dunne says he is yet to be convinced the Reserve Bank lacks sufficient mechanisms to curb inflationary pressures, or that additional levers are required.

Green Party housing spokesperson Sue Bradford says there are better ways of cooling the market than by slapping a levy on mortgages.

“The Green Party has long considered that a capital gains tax on all but the family home could be a better solution.”

It will be discussing whether to adopt such a policy for next year’s election campaign.

Bradford says “huge” price rises in the housing market recently have not been a sufficient deterrent, and “people kept on treating houses as their prime investment option even back when we had double digit interest rates.”

New Zealand Property Investors’ Federation president Martin Evans confirmed the federation would respond to the levy proposal.