Property

LVR restrictions 'days away'

Reserve Bank governor Graeme Wheeler is so worried about what a house price correction could do to the stability of the banking system that loan-to-value restrictions may be only days away, BNZ says.

Tuesday, June 04th 2013

Head of research Stephen Toplis has issued a commentary highlighting how concerned the central bank is about house prices rising – from a point where they were already considered overvalued.

Toplis said the speed with which the Bank had implemented its macroprudential tools – including the ability to enforce loan-to-value restriction – indicated it wanted to use them as soon as possible.

“This reflects the fact that house price inflation continues to accelerate at a time when the central bank already considers houses to be overvalued. In turn, it believes that the banking sector is increasingly vulnerable to what will inevitably be (though we have no clue when) a future house price correction.”

Toplis said he supported the Reserve Bank’s moves to discourage speculators, particularly in Auckland.

“Be that as it may, what these prudential policy measures will do, in the very words of the central bank, is ‘reduce the actual supply of mortgage lending'. The question is: if the limited supply of new houses is the primary source of house price inflation, as we suspect, what are the longer-term implications of potentially further reducing that supply via credit rationing?”

He said New Zealanders would be the lab rats in the experiment. It would likely either mean a reduced supply of finance or increased borrowing costs.

Toplis said the macroprudential tools would have only a marginal impact on decisions about the OCR. BNZ still does not expect any movement in the cash rate until next year.

Comments

No comments yet

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

Support for regulation

Monday, March 18th 2024

Support for regulation

REINZ has emphasised the need for property management regulation to Parliament’s Social Services and Community Committee.

A better investment market

Thursday, March 14th 2024

A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

[OPINION] Recessionary times

Thursday, March 14th 2024

[OPINION] Recessionary times

It is not the best out there for many businesses and property sector people. Sales are down across the board, our clients’ confidence is falling, and there is a lot of uncertainty.

Interest rate expectations: It’s not over yet

Thursday, March 07th 2024

Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.