RBNZ Keeps Mortgage Deposit Rules in Place Amid Flat House Prices
New Zealand's central bank has decided to keep its mortgage deposit and income rules in place. The Reserve Bank of New Zealand (RBNZ) made this decision after its annual review, citing that housing risks are 'currently contained' due to flat house prices.
The RBNZ maintained the current caps on banks' exposure to low-deposit loans, allowing up to 25% of new owner-occupier loans to borrowers with deposits under 20%. This means a loan-to-value ratio above 80% is still permitted. Similarly, banks can still make up to 10% of new investor loans to people with deposits under 30%, resulting in a loan-to-value ratio above 70%.
The RBNZ also kept debt-to-income limits, which restrict how many loans banks can write where the mortgage is large relative to a borrower's income. This decision aims to prevent risk from building quietly during the next upswing rather than scrambling to cool things later.