RBNZ Keeps Loan-to-Value-Ratio Restrictions Unchanged
The Reserve Bank of New Zealand (RBNZ) has decided to keep its loan-to-value-ratio (LVR) restrictions on banks' home lending at current levels, citing that housing risks are currently contained. This decision follows an annual review of macroprudential policy by the RBNZ's Financial Policy Committee.
RBNZ Assistant Governor for Financial Stability Angus McGregor said that nationally house prices have remained broadly flat in recent years, while mortgage lending growth has been modest and the share of higher-risk lending remains manageable. He also emphasized that debt-to-income (DTI) restrictions will continue to be in place, complementing LVR restrictions.
The current LVR restrictions allow up to 25% of new lending for owner-occupiers to have an LVR above 80%, and up to 10% of new lending for investors to have an LVR above 70%. DTI settings also limit the amount of debt borrowers can take on relative to their income, with current settings allowing banks to lend up to 20% of owner-occupier lending to borrowers with a DTI ratio greater than 6 and 20% of investor loans to investors with a DTI ratio greater than 7.
The RBNZ will continue to monitor developments in house prices, mortgage lending, and broader financial stability risks. McGregor noted that the next macroprudential settings review is planned for about 12 months' time but could be brought forward if conditions warrant.