The Reserve Bank (RBNZ) says it will ease mortgage lending limits from December 1, allowing more property buyers to borrow a larger share of a home’s value.
Angus McGregor, RBNZ acting Assistant Governor of Financial Stability, said the central bank had been reviewing its approach to loan-to-value ratio (LVR) restrictions over the past year.
“We concluded that the introduction of debt-to-income (DTI) restrictions last year means LVR settings can be less restrictive on average. This includes looser default settings that we expect will be in place most of the time, except for when risks are particularly elevated,” he said.
Banks will be allowed to lend more to low-deposit borrowers, with the share of new lending to owner-occupiers with under 20% deposits rising to 25% from 20%, and to investors with under 30% deposits rising to 10% from 5%.
McGregor said these settings will give banks more flexibility to lend and improve access to credit for investors and first home buyers.
“Now is an appropriate time to move to the new default settings. House prices are within our range of sustainable estimates. Growth in mortgage lending remains moderate and the share of high-risk lending is low,” he said.
DTI restrictions will remain unchanged to limit high-risk lending during housing market upswings and periods of low interest rates. McGregor said these act as a guardrail to contain the severity of housing market corrections.
These policy settings will be the responsibility of the soon-to-be established RBNZ Financial Policy Committee from next year, and will be reviewed annually or when risks emerge.
Finance Minister Nicola Willis welcomed the change, saying it would make it easier for first home buyers to get into the market.
“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder,” she said in a press release.
42 Comments
Just. Wow.
Bankers must be missing bonuses. More debt for the win...
But it's not winning.
the revolver is almost going click.... but who would be foolish enough to buy here and not be able to lock into low long term rates?
lets see if new bag holders apply above FHBers
They're trying to make 2021 happen. It may not happen
Also shows that this country has no other vision about improving its economy than selling houses to each other
Also shows that this country has no other vision about improving its economy than selling houses to each other
Hang on. This is all about setting conditions for the marginal buyer and ideally results in a healthy market. When the property market is healthy, prices tend to rise and people feel better about themselves and are prepared to open their wallets. That 'improves the economy'.
The boffins and Willis are thinking rationally.
There's nothing healthy about something that can only survive on over leveraged speculation
so the answer is lots of people borrowing 25-30 years at low rate about to get screwed if RBNZ lift OCR? as they tend to fix short as its cheap
How about this country works for a living for a change?
You know, like making stuff, employing people.
Sorry, best we can do is making GIB and employing tradies.
Seriously though, the changes seem reasonably small and logically I can see a case for relaxing criteria now prices and therefore risks are lower. Hopefully this isn't the first of many such relaxations. It's good to see the DTIs remain and I hope they don't get touched in the future unless it's to tighten them up.
some people
Not sure why we need nanny to be deciding who can borrow money in the first place.
If nanny had been a little more forthcoming with the DTI limits we could have significantly reduced that huge price spike and collapse that happened after Covid. Sometimes nan knows best and we need to be saved from ourselves.
Kind of like if we had a price spike in food, and nanny comes and saves us by saying young families can no longer buy food (and it’s for their own good)?
I think more like if we had a food shortage and nanny says ok we're going to have to ration this rather than letting everyone bid up the price of potatoes.
Where the rationing rules are “only 10% of potato’s can be sold to the needy, the rest are only available to the well off”
Yeah fair point, not a great analogy. I do understand where you're coming from, but having been through a couple of financial crises it does seem to me to be the case that banks need to be saved from themselves. The competitive pressure is such that they will ramp up the irresponsible lending until it breaks and becomes the government's problem.
I particularly like DTIs as they are so effective against the old rental property investment snowball - if we keep it up it simply won't be possible for so many to buy up 5 or 10 properties in quick succession. Maybe this will contribute to people seeking out productive investments - ways to get rich that may actually benefit society.
The problem with that is the second best option is to invest in some offshore property-backed ETF. People who invest in housing do it either because they can borrow to do it, therefore don't need any $, or because they've made gains in some legitimate business and want to park them somewhere that beats inflation.
Your average property investor isn't actually a viable something-else investor, which is part of the problem. For domestic productive investment we need national savings.
you mean the alternative is not tax free capital gains, involves risk and is hard to leverage?
Yeah thats a lot to overcome in a PONZI alternative....
Many of us fall back to gold, equities, livestock agri etc etc
The 10% are ok, the other 90% not so much
Anyone buying a rental property has access to at least a hundred grand, that's plenty to start investing in shares. These days fees are by percentage on many platforms, so really you can start investing with any quantity of money.
There's already a less regulated second-tier lending market for those who want firmly out of the safety net. History has proved that where nanny butts out at the big end of town, taxpayers end up bailing out the losers. Taxpayers therefore prefer nanny to be a little discerning.
I’d prefer a system where nanny guarantees to never bail out the losers but keeps them well informed of the risks. Like all banks etc must send a six monthly letter/email with their current credit rating etc.
When nanny tries to pick winners and losers, we just end up with more losers.
You do realise that if we have more losers we have fewer winners?....are you confident you will (continue to) be one of them?
That sounds akin to credit rating agencies and their threats of a downgrade. It doesn't really seem to change behavior all that much, eg. US federal budgets...
Nanny in this case is doing little more than qualifying would-be debtors based on easily measurable factors that imply ongoing solvency. There's no favouritism really, except where things like new builds inexplicably have different criteria.
At the end of the day promising you won't bail anyone out, no matter their importance, is a quick way to accelerate foreign acquisition of troubled domestic firms. AirNZ, for instance, would probably be owned by Qantas by now if we hadn't bailed them. I don't know that's actually a better outcome than taxpayers swallowing a rat and taking a stake that can later be sold down.
Plunge Protection Mode engaged.
you cannot make people borrow to buy over priced assets with cheap money... they have to lend long term...
they have still bought an overpriced asset
this will end badly as the market continues to fall
The Nz Govt and RBNZ main goal is now to be the: Property Ponzi Proection Squad!!!
They will be financially indicted due to these dangerios actions.
Here we go again.
A housing boom is our one trick pony. The dairying boom has lived up to its usual reputation of being all hype and no substance so let's do whatever we can to get the property ponzi going again.
Wow. NATS and Partners capitulate to the ponzi lobby. Sad really, just sad.
If all rentals attracted a land tax then fine, but they dont. When all the youth workers and recently arrived immigrants unable to compete against leveraged specuvestors have finished moving to Straya, look back to this day.
And then were does tax come from...?
ask the French, they are looking for more tax revenue
And the Poms. Which is creating a high net worth exit along with what ever commercial activity the can remove.
Stupidity...
C'mon, the high net worth were the Russian oligarchs who saw the writing on the wall long before the UK thought to start taxing them. Sometimes the big money is ugly money, especially in the UK.
Anyone with genuine connection to the UK or who is reliant on the UK economy to make their dough isn't going anywhere. Same as the billionaires in China who keep a foot carefully out the door but don't actually leave.
"Pleeease take on more debt"
Uncle Swagman needs YOU.
Banks will be allowed to lend more to low-deposit borrowers, with the share of new lending to owner-occupiers with under 20% deposits rising to 25% from 20%, and to investors with under 30% deposits rising to 10% from 5%.
Me thinks it may need more then this however small numbers?
“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder,” she said in a press release.
And letting the market continue to fall will let those FHBers onto a lower priced first step.
They are not so stupid Mrs Willis... there is no FOMO anymore
I can smell the uranium on it as you lean forward!”
"If we don't let you buy a house, it will be easier for you to buy a house". How long can they keep applying that? You could argue the same thing about food...
They are not so stupid Mrs Willis... there is no FOMO anymore
I think she's economically literate in that she's very good at parroting the prevailing thoughts and narratives. Very much a RW bureaucrat or Fonterra C-suite / upper management type. Don't rock the boat but very rigid in view with little peripheral thinking and understanding.
They are not so stupid Mrs Willis... there is no FOMO anymore
Then why the uproar? If the ponzi is dead, then this is just a futile attempt to try and reignite something that isn’t going to happen.
Unless it’s not dead…and then a fair few commenters on interest will be proven very wrong. Interesting times indeed.
Unfortunately it's not dead. Whatever happens in Australian property, NZ soon follows. The low immigration we currently have is our only handbrake.
Except this time it is the opposite and the ozzy market bubble has been blown too big, soon to deflate faster. they are 2-3yrs behind us on this one and they're still pumping their ponzi as hard as possible.
Hang on,
theres nothing to see here. Its virtually impossible to get a loan without 20% equity, especially with other constraints such as DTI and LVR (especially impacting investors.)
This won't impact the market
Remember during the fizzy years Squirrel was running their Launchpad product for higher-income people who had failed to save a deposit, where they'd do a short-term high-repayment loan of the deposit, then you get a regular loan for the rest. They recognised there's a slice of first home buyers who have great incomes but don't want to wait 10 years to get a house. Those are also likely the kinds of customers the banks wouldn't mind using their low-deposit lending quota on.
It was only a couple of decades ago the bank would lend you 100% value of the house, plus another 5% on top to do a capital-enhancing reno. There's still room to go...
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