RBNZ reports high loan-to-value ratio (high-LVR) residential mortgage lending has fallen to 5.6% for the six months to the end of March 2014. (High-LVR loans are those that are made to someone borrowing more than 80 percent of the value of the property that is mortgaged.)
Deputy Governor Grant Spencer said:
“Our initial assessment is that restrictions on high LVR lending helped reduce house price inflation. A more in-depth assessment of the policy and its impact on the housing market will be included in next month’s Financial Stability Report.”
- All banks have complied with rules that restrict high-LVR residential mortgage lending to no more than 10 percent of total new mortgage lending.
- In September 2013, before the introduction of the new rules, high-LVR lending was approximately 25 percent of all mortgage lending.
- The restriction came into force on 1 October last year and 31 March 2014 was the end of the first six month period over which all registered banks had to comply.
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To the extent that this macro-prudential tool impacts to reduce the pressure on house price inflation, it argues for a lower level for the cash rate than would otherwise be the case, and reduces buying pressure on the NZD.
