Adrian Orr says the RBNZ is seeing early signs of house prices being driven by high leverage loans and by investors rather than households

Adrian Orr says the RBNZ is seeing early signs of house prices being driven by high leverage loans and by investors rather than households

Reserve Bank Governor Adrian Orr is warning that the central bank is "looking at" the prospect of re-introducing loan to value ratio (LVR) limits on bank mortgage lending.

Orr told the Institute of Finance Professionals New Zealand (INFINZ) virtual conference the central bank has "tools that can be used at the margin if we think that banks are getting carried away and outside of sustainable risk appetites".

Back in May the RBNZ removed the limits on high loan to value ratio (LVR) lending that had been in place since 2013, saying these would be lifted for at least 12 months.

Since then there has been a significant increase in the amounts of high LVR lending to particularly first home buyers and to investors.

The housing market has positively roared into life after the lockdown. And September saw the best September housing sales numbers for 14 years, while there were record median prices in nine regions.

On the question of the recent upsurge in activity in the housing market, Orr said: "When will it worry us? When we are seeing it being driven by very high leverage loans and when we are seeing it being driven by investors rather than households and that is where our tools are marketed. 

"What are we seeing at the moment? - Early signs of exactly both of those.

"We are starting to see the new lending going back into the 70%-80% loan to value ratios and the investor side."

He said the "tool" - apparently meaning specifically limits on LVRs was there. "We can put it back on if needed." 

Asked at what point he thought he might need LVRs, he said: "Well we are looking at it now.

"Is that a signal for when we put it on? No.

"But we are looking at it in real time."

Orr made reference to the fact that the "stock" of high leverage loans on bank books had been run down since the imposition of LVRs from 2013 onward, with banks now having far fewer high LVR loans on their books proportionately.

"At the moment relative to where we were on the extremes it's still looking okay. But it's very evident that won't stay the same under current conditions."

And then in comments apparently aimed at the lenders, he said: "So, box smart. Do it yourself or have it done to you. 

"...I have to say the industry always just wants to have it done to them."

And Orr indicated he would be prepared to use other tools as well.

"...I'm thinking again around deposit to income ratios - all of these tools are available. But they are towards the same mandate. Financial stability, soundness and efficiency."

Deposit to income, or as usually described, debt to income ratios have been blowing out in the past two years.

The RBNZ has been keen on some kind of debt to income tool and has previously tried to have one inserted into its 'macro-prudential toolkit', but this was deferred by the National Government in 2017 and subsequently the issue has been rolled up into the review of Reserve Bank legislation that is still before parliament.

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118 Comments

32
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“The limit to monetary policy is high inflation, the failure of monetary policy is deflation."

I'd describe the last 12+ years as the failure of monetary policy, personally.

37
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The home page of ANZ https://www.anz.co.nz/personal/
The first thing you see: "Expand your portfolio with 2.55% p.a. fixed for 1 year."
"Start your property investment loan application today." "Apply Now"
Orr is a disgrace. The banks are having a field day on the back of LVR removal and artificial zero wholesale rates created by Adrian. They are specifically targeting investors.

I agree 100%. These latest RBNZ policies are structurally destructive and it will take significant time to repair the damage caused by them.

15
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Adrian Orr should disclose his own property investments to reveal the conflict of interest. I believe media is not critical enough to find and report politicians' conflicts of interests in the policies they propose.

I said this and it was suggested I was spreading conspiracy theories.

32
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"The central bank needs to focus on the medium term, said Orr."
Someone point me to the last Medium Term that the RBNZ has gotten right!
The Medium Term always seems to be forward-looking, and no one looks back on what a failure the past 'medium terms' have been.
Disgraceful.
Anyone who ran a commercial operation with such results would have found themselves looking for another job many moons ago.

18
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They haven't got a clue as to what to do - just sit and watch. Petrified into inaction just in case it upsets people.
What are they going to do to sort things out in the mythical Medium Term?
Oh, don't tell me - write a strongly worded letter to the banks. Right?!
"Now listen up youse guys. You need to be more careful with your lending activities, or.....or....well...umm...Well, we'll have to write you another letter, and by crikey, that will have even stronger words in it"
It would make me laugh if it wasn't so serious.

The point is banks are being careful by lending to investors with excess collateral which the government is underwriting with rental support payments. Furthermore, bank RWA capital demands for investors are outweighed by the low credit risk attached to such loans.

12
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Exactly. The government really needs to address that issue of the Accommodation Supplement. And, yes, banks are just responding to the settings RBNZ have facilitated.

21
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I’ve been mentioning here (for a number of years) that if we remove socialism from the housing market, it will likely be the landlords who scream louder than the poor people who actual need the support.

The government should go from subsidising rent payments which in tight markets landlords pocket by increasing rents to subsidising the construction of affordable rental housing i.e. the Austrian Housing Model.
Recommendation no. 7 in this paper.
https://medium.com/land-buildings-identity-and-values/if-not-now-when-f9...

i have advocated that for years, why do we spend 2 billion a year and raising year on year on the accommodation supplement rather than on building social housing, on the building side it achieves more in that it creates employment as well as housing and leaves more in the pocket for those renting to spend in the consumer economy.
this government has a chance now for a massive state house building program me , i hope they take it up.
and i am not against selling state houses as long as they make sense, example no good having a 3 million dollar state house in a well to do suburb housing one family, sell it and replace with four/five places housing four/five families. or having empty houses in places nobody wants to live

My preference would be to use the Austrian housing model to subsidise the building of thousands of affordable rentals a year and for this to be on top of the about 2000/year new state houses being built. If these houses are built around rapid transit then a triple whammy can be achieved i.e. it can improve inequality, environment and Covid recovery goals... NZ needs this and even the business community knows it.
https://www.newshub.co.nz/home/money/2020/10/construction-companies-want...

LOL. Exactly, 100% right. We are in a socialist housing market, supported by state welfare for landlords. We are in a paradoxical situation where the real economy and hard working Kiwis are, to all intends and purposes, subsidizing unproductive and socially destructive housing speculation. The longer term effects of such unbalanced situation, magnified by the shortsighted, one-sided and reckless RBNZ policies, are going to be felt for many years to come.

Yes, they will act just like Hans Brix! I just don't whether Orr is Kim Jong Il or Hans Blix:

https://www.youtube.com/watch?v=UIPSvIz9NDs&ab_channel=ChiodoBros.Produc....

18
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The lack-of-comments here reflects the collective eye-rolls happening every time Orr speaks.

21
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I read it that he's ready to act if house prices don't go up fast enough.

Lol, correct, he's a lousy actor though.
"We have so many tools we can use", its all we hear. Backed into a corner and about to destroy the bond market.

The RBA have green lit a property bubble like I have never seen before.

18
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Happy realization Mr Orr.

Mr Orr is proactive and very prompt to support speculators when fear of house price fall and take overnight decession but when speculators - so called investors are driving the house price to extreme attitue is wait and watch - why not be prompt Mr Orr ?

25
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Orr managed to quickly decide to print $100 billion, take rates to near zero, remove LVR rules and give anyone who wanted it a mortgage holiday for 12 months.
But housing market going dangerously crazy into more of a bubble....we will watch it and be ready to act.
Deposit guarantee for savers.....requires more work. No plans to bring this forward....
If you are debt fueled Adrian will save you.
If you are conservative with savings Adrian will happily screw you over.

"the central bank will act if it sees house prices being driven by very high leverage loans and by investors rather than households."
RBNZ speak for reintroduction of LVRs for both owner occupier/FHB and investors.
Well needed.

37
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DTIs are needed.

Also, investors should be prevented from using unrealised equity to leverage into subsequent properties.
You want to buy more properties with your equity, fine, realise it first.

18
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Agree - I think this is one (of the many) key reasons why the rate of home ownership has been dropping. Using equity to buy additional homes is simply another reason that pushes prices higher (and further away) from fundamental values that would be appropriate for household income levels in NZ.

11
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Watch the property lobby up in arms advocating that their members provide a service and to do as you have suggested will reduce rental stock and increase rent prices....

What's your logic with DTI or LVR? Many investors have so much equity neither are an issue whatsoever, It just keeps FHB out of the market and will accentuate the divide. I'll say it again, this is a role for tax.

TK - what tax strategy do you think might be most appropriate?

I'd be guessing, but it's no coincidence Australia has an annual land tax, stamp duty and capital gains tax on investment property and commentators here regularly post real estate ads with cheap houses.

One wonders how it will ever become politically viable to ever implement any such thing in NZ.

All those taxes are deductible against income however, that's why Australia is ground zero for negative gearing.

DTi would work. Especially on debt speculation, I mean investors. Yield investors I know are all selling the dogs in their portfolio

14
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The only reason they have so much [paper] equity is because high DTI loans are issued.

If high DTI loans weren't issued then that marginal buyer, with that marginal credit wouldn't be in the market setting prices.
Ergo, [paper] equity wouldn't be as high and neither would prices.

The whole idea that you need to give FHBs more credit or more access to KiwiSaver etc is chasing your tail on affordability.
- Give FHBs more credit (no LVRs and non-existent DTIs) and they ALL have more credit to spend on houses, so they ALL get into more debt and pay higher prices.
- Give FHBs access to KiwiSaver and they ALL access KiwiSaver and leverage up on it. AND they pump all their retirement savings into one concentrated illiquid asset.

This stuff doesn't help FHBs. It's poison for them.

11
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Totally agree with this. $10,000 grant instantly boosts house prices by $50,000, meaning the buyer will be paying back a extra $40,000 on that alone. A extra years work.

Te Kooti
That is my understanding as well regarding DTI . Current bank lending criteria relating to income is already working against FHB and advantaging investors as rental income is being considered as part of income.

First investors don't have loads well not big investors the strategy is as soon as you have enough equity to buy another house you do so halving the required LVR doubles the amount you can buy. Second first home buyer don't need to be able to borrow more they need houses at affordable prices, spending your life and your children's life paying of a mortgage does not sound like a good proposition. That's a major thing wrong with society the attitude "now if I can get it now on credits everything is all good". The property market needs to collapse and the sooner the better, It will mean people no longer think of housing as a sure thing and my think twice about paying ridiculous prices for it, maybe invest in stocks instead, they already outperform housing, but housing is considered "safe", and people may stop charging ridiculous prices for everything else in order to make enough money to cover a basic need like housing.

Excellent comment. I call these people the debt fueled.
The property market does need to collapse. Unfortunately only is there is mass unemployment will this likely happen.
As when the banks cant get principal repayments back that's when the problems will arise.

20
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I am sure using encumbered, excess unrealised equity to act as a deposit to secure a bank loan to purchase further residential property assets qualifies as a ponzi scheme.

Yes that is one of the reasons I think our housing market has ponzi characteristics. Using equity to buy additional properties is fine as long as more people keep doing it. But it adds artificial demand by people who otherwise (in a flat or falling market) who wouldn’t be extended the credit to buy the additional home.

It does qualify, or should anyway.

12
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When you think, an investor with 20 properties only needs house prices to increase (on paper) 2% before they can buy another property with a 40% "deposit". That continued participation in the market helps drive up demand, further pressuring price increases and equity growth. Rinse & repeat.

Some of these people will need prices to increase a bit more before they can do the same.
https://www.newshub.co.nz/home/politics/2020/08/the-number-of-properties...

“The limit to monetary policy is high inflation, the failure of monetary policy is deflation. I’d prefer to be battling the quality problem of re-containing high inflation than the real challenge of battling deflation.”
Whether one agrees or not Orr is being very clear on the outcomes the RBNZ are focused on.
I guess there is collateral damage over shooting or under shooting !
Better the economy runs to hot than to cold, easier to control as he says.

I guess the upside of inflation is the large debt people are holding has its value eroded. Theoretically becoming easier to manage.

And the corresponding downside is those with net savings lose through inflation.

Only if their income goes up. In the 1970s there was stagflation, food and petrol up, wages flat, result, strikes, civil unrest, troubled times.

The Chairman of the Central Monetary Planning Commitariat does not know what else to do. Central planning is like that, correlations go to 1, there is no diversity of options, you must do as you are told and make do with with what you are given. The West has adopted a Sovietisation policy via central banks. We are so indebted we rely on central banks keeping interest rates down. This causes debt to rise, so interest rates must come down further.

Interest rates cannot rise, or there would be mass bankruptcy. So, what can adjust? The currency can adjust downwards relative to the currency of less indebted nations. The countries with less debt in the non-financial business sector bounce back faster after recessions than those with more non-financial business debt. This stuff really matters.

God wants a debt jubilee every 50 years (see https://en.wikipedia.org/wiki/Jubilee_(biblical))

2% inflation over 50 years achieves this goal. RBNZ are just carrying out the will of the lord, anyone opposed to CPI targeting is a heathen.

Stay off the drugs and avoid the sky braying kids

14
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BusinessDesk report that Orr told the INFINZ virtual conference the central bank will act if it sees house prices being driven by very high leverage loans and by investors rather than households.

“What are we seeing at the moment? Early signs of exactly both of those,” he said.

So rather than act now lets just juice this stone a bit further shall we.....

RBNZ is only NOW seeing early signs of a heated housing market!!! Make me wonder with all the experts they have they could only now see what the ordinary man in the street could see long before. Perhaps RBNZ needs to clean their fogged eye lenses .Or just throw it away for new ones ...... better still is to do without the lenses as the ordinary kiwis do. They could see things alright without it

26
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How is he not seeing it's almost entirely investor driven. Investors want the low end 1st homes fhbs want. I've missed 5 houses in the last year now to be beaten by investors. I'm not sure whether to call them that (investors) as the rent will not give a return on what they paid for the houses.

10
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Yeah exactly. The whole last 8 years at least has been investor driven. How many homeowners actually own one house? I bet it's less than 50%. Disgusting.

Might have to ask Jacinda I believe she is on her second $1M+ house in Auckland.
Just do what Jacinda does not what she says.

Let's do this!

14
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Might have to ask Jacinda I believe she is on her second $1M+ house in Auckland.

She's the epitome of chardonnay socialism. Definitely no Che Guevara.

Yes, well, thankfully she isn't a mass murderer, unlike Guevara.

Not the point. She's not a revolutionary socialist. Guevara was.

When Cindy responded in the debates saying she didn't want house prices to go down and wants them to stabilize she was actually referring to her own properties!
They are all the same. Our politicians have a huge self interest in keeping the bubble going

It's not hard to have a 1m+ house in Auckland. They're vastly inflated. Do you mean she owns more than one house? Or are you trying to make her look bad with misinformation?

She doesn't need misinformation to look bad. Just the facts of failure will suffice... namely the topic of this article.

She doesn't need misinformation to look bad. Just the facts of failure will suffice... namely the topic of this article.

I've had similar happen to me. The other problem is that a lot of people aren't selling their first home when they move up the ladder- they're hanging on to it as a rental, thus depriving someone younger the opportunity to get into a home in the FHB bracket.

That's very interesting I've not considered that. So really we have a property elevator in NZ not a ladder.

Sad that it's interesting
You should be your first tenant is common sense to the intelligent investor
16 years at a government school from the critical learning years, what an idiotic waste of time, what were you doing studying algebra or Pythagoras theorem or diversity theories or humanitarian studies....:) :)
#Teach kids financial literacy from 4 years old

13
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MM, teaching financial literacy is not the same thing as teaching everyone to be a property investor. The idea that everyone should try to become one, and the fact that its become basically the only game in town (such that people who chose to work for a living are basically screwed) is a massive part of the problem in this country.

yeah, you can teach them financial literacy , but then they will fail in real life , since what you are going to teach them is being destroyed nowadays. Teach them to be a gambler and they will prosper :) It is funny and sad at the same time

I've had this very idea pushed to me multiple times. Keep the first home as a rental, leverage some equity into a new place. "Increase income streams".

Yep everyone says it, you just got to get in!! But it gets harder and harder as the majority want to buy, hold, rent as much as they can.

Hence my elevator analogy... It keeps those on it going up, but the ones on the ground are stuck there.

Yeah but when a devastating fire breaks out you might be happy you saw the smoke and wisely decided against blindly ignoring the danger and just jumping into the elevator feeling safe and secure in the knowledge that this building has stood strong for 100 years and never burnt down before.

Haha awesome it works on many levels

Not just FHB homes.

We got blown out of the water on a *home* we looked at - it went for over $2.5m, $500k above CV.

It's now on the market to rent asking for a paltry gross yield of just over 2.0%.

We've just missed one on Panmure CV 720 sold for 975. Xlease, with a gang living up the road... Another in Mt Wellington, CV 920. An investor bought it, having seen it for the first time on auction day, for 1.2 mill ...

We had a similar situation a couple of months ago. RV 810k, we offered 1.037m which seemed like overpaying massively.
Sale price 1.356m
https://homes.co.nz/address/wellington/crofton-downs/6-winston-street/PawXn

The market just seems crazy overheated. I'm sitting out for now.

The market just seems crazy overheated. I'm sitting out for now.

Probably a good idea. I think it's something like 70% of homeowners can't afford their own homes (Ipsos research). Will not end well.

Yeah mate, you just sit over there and have a fiddle and whine
Nothing you can do, its all big brothers fault

Yeah mate, you just sit over there and have a fiddle and whine

Not whining. You need to talk to the respondents in the Ipsos research. I just mentioned it's probably a good idea not to jump into a market in a once-in-a-100-year event.

Can you just remind everyone here how many rentals you own? 3...4...5...more?

That's irrelevant too. The Ipsos research is about people's own homes. 2/3 of homeowners would not be able to afford their own homes based on their incomes.

Half of that 2/3 are probably retired now so that's not surprising.

Excellent point well made. That is why I ignore the headlines that say Tauranga has the most expensive housing in NZ/the world.. schoolboy errors

IO, We might like to ask you the same question, if the answer is zero does that mean you are completely unbiased in your opinions, assertions and solutions. Fat chance.

Yea my mortgage broker was telling me its probably best to sit tight for the moment, which is quite concerning

14
up

The arsonist and firefighter.

Not long before the 2008 GFC , when interest rates had been hastily hiked by Dr Bollard to around 8.5%, there was a popular saying around the traps that the RBNZ always arrives at the party too late, does too much and stays too long. Can someone tell where the party is and what one should bring, or has someone turned the lights off and everyone is fumbling around in the dark for the switch.

21
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It’s 4am everyone is smashed and RB just turned up with lines and vodka...

.

Glad to see the governor is ready too act!!!

If house prices slow down he is ready and willing to step in and help boost those prices again..

Has he acted ??????

The central bank needs to focus on the medium term, said Orr.
“The limit to monetary policy is high inflation, the failure of monetary policy is deflation. I’d prefer to be battling the quality problem of re-containing high inflation than the real challenge of battling deflation.”

The type of policy actions undertaken by the RBNZ lead to disinflation. The Governor has only to observe the results of his DM peers around the world to note high inflation and associated outsize economic growth have been missing for the last decade except for odd short periods.

We would hardly be discussing the prospect of negative official interest rates if it wasn't the case. Furthermore, the RBNZ is already purchasing negative yield government bonds in it's LSAP window operations.

Even more reason to believe banks are acting in a conservative manner consistent with central bank policy actions. It's the government paying above par and letting the banks escape the redemption risk of less than zero returns on their Crown investments.

Inflation is great if your a debt farmer. It is crap if your retired and living of savings. Imagine what a million in the bank gets you today. This quote simply dumps a large pile of steaming on the retired.

Only partially true - times of high inflation would now mean times of very high interest rates to try and bring inflation under control. Which means your money won't completely lose it's value, it should near enough keep up with inflation.

Could Orr be taking note of some Interest articles, comments or emails? I must be delusional

Perhaps, but more likely just paying lip service much like JK (and soon to be JA if she doesn't pull finger) during his tenure over the housing debacle...

I agree with at least 50% of this comment.

Did you ever get a reply to your email to young Adrian?

If so then he should put LVR on first home 10%, second home 50%, third home+ 100%.

RBNZ Governor 'watching the housing market'

Still Watching Mr Orr.

Borrow from Peter to screw..Paul....whatever have we come to.

Must be amoral....somewhere in this.......cos it totally, totally is.

13
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Let's compare John Key and Jacinda Ardern:

John Key's first term:
Median house price sept 2009 was $348,880
Median house price sept 2012 was $371,000
Increase $22,120, or 6% over the three year period.

Jacinda Ardern's first term:
Median house price sept 2017 was $525,000
Median house price sept 2020 was $685,000
Increase, $160,000, or 30% over the three year period.

Go Jacinda!

https://www.interest.co.nz/charts/real-estate/median-price-reinz

Some people seem to think house prices double every 10 years. It seems to be some sort of rule in NZ. So in 2030 will Aucklands house prices be 2 million on average. Or 2040 will house prices be 4 million?

some people called Ashley Church.

House prices could easily be $4M by 2040... as long as average income is $400K PA. LOL

Not asked about once during the televised debates. 'Housing crisis' not mentioned a single time. That's different to Key/English being challenged on it and not saying it, it's the media not even bothering.

Yes, I was surprised by the comparison. I was expecting them to be roughly equal.

From memory the Clarke/Cullen government achieved 100% house price rise in their 9 years and the Key/English government only achieved 80%. They are both a symptom of NZ's institutional blindness to flawed policy on capital inflow, immigration and building regulations.

https://rogerwitherspoon.wordpress.com/2018/10/13/lies-damn-lies-and-sta...

TradeMe new listings added today 220 approx dwellings to rent in greater Auckland. Is that normal?

16
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Finally, the idiots are realising they well overcooked the response AND it's starting to get main stream media attention: https://www.stuff.co.nz/business/opinion-analysis/123135399/reserve-bank...

If they re-apply the LVRs, I am going to send them a "please explain" to my angrily worded submission to them when they decided to remove the LVRs. Their response was "Please look at our web page: https://www.rbnz.govt.nz/news/2020/04/reserve-bank-removes-lvr-restricti...", which was laughable and I recommend people read it, even just the first paragraph:

"The Reserve Bank has today decided to remove mortgage loan-to-value ratio (LVR) restrictions for 12 months. The decision was made to ensure LVR restrictions didn’t have an undue impact on borrowers or lenders as part of the mortgage deferral scheme implemented in response to the COVID-19 pandemic."

Reading this you should hopefully have multiple "WFT???" moments as I did. LVRs are there to ENSURE FINANCIAL STABILITY. Removing them, ergo, REDUCES FINANCIAL STABILITY, it does NOT enhance it. Having "an undue impact on borrowers" is EXACTLY WHAT WAS and IS needed, to ensure they do not sign up for loans beyond their means at a time when their employment is shaky, which puts the financial system at risk. Now we see people signing up for loans beyond their means and banks encouraging it... putting the financial system at risk. The RBNZ acted completely irrationally at a time when they needed to act rationally.

The RB continues to show it is not only working with outdated models, but that it refuses to act with common sense. The idiocy of these people is clearly on display, we should be excoriating them for their ineptitude.

But if the RBNZ acted rationally there was (and in my view still is) a chance our economy could have experienced significant trouble (debt defaults, tumbling house prices etc). I think they pulled too many levers at once in a panic and are now looking for the ‘abort’ button. Mortgage holidays, lowering lending rates, removing LVRs...but the question that remains...where would we be if they didn’t take all those measures? I guess we’ll never know now.

No no no. You miss the point IO. The LVR's was and is not one of "the levers" to prop up the economy in times of crisis. It was/is a financial stability backstop, specifically there to ensure future financial stability, to make sure there aren't mass future debt defaults. Removing it dramatically increases the chances of mass future debt defaults. Removing it therefore has had the exact opposite effect of what is the RBNZ's mandate, which is why I so vociferously argued as to why it should not have been removed and should probably be increased, if anything.

I would argue the other policies (mortgage holidays, lower rates, money printing) are levers to get us through the crisis as they all help to smooth over uncertainty by providing some measure of economic stimulus. The LVRs are instead a policy to ensure financial stability, nothing more. This was the problem with the RB removing them, they conflated the two as well. Financial stability policies ARE NOT the same as economic stimulation policies. The two are not equivalent or at least should not be in the RBNZs books.

Are you talking about financial stability of a normal market economy or the financial stability of a housing ponzi. To make a ponzi stable you must ensure new entrants continue to join. Remove LVRs and lower rates during COVID crisis when new entrants were being deterred. RBNZ = tick. Ponzi stabilised (for now!)

(In a serious note I understand what you’re saying and why I was outraged when they announced the policy at the time - I thought it was bloody bonkers).

Which is what I mean by the comment "...or at least should not be in the RBNZs books". They do not acknowledge that it is a ponzi scheme, therefore cannot (should not) act as if it is one.

Your forgetting Orr has said many times their main KPI is inflation management. So I believe this is exactly what he wanted, to use a surging housing market to make the KPI look better.
Shocking, none the less. You were right about the wtf moments...

Except that the world over, it's been shown time and again, lowering interest rates does not sustainably create inflation. Hasn't worked anywhere for decades. Hence why they are using the wrong models...

This was a true gem, which shows the forecasting ability of Bascand:

“Given the current uncertainty around the economic outlook, the Reserve Bank considers that it is unlikely that banks will weaken lending standards to high risk borrowers. The more likely risk is that banks are overly cautious with lending to credit-worthy borrowers,” Mr Bascand says."

What happened? Banks weakened the main lending standard (future potential to pay off loan) and banks began lending aggressively (and why wouldn't they in an attempt to replace their lower margins with more customers). Bascand is clearly inept at understanding the mechanics of what he is in charge of.

Yes they know this as per this speech delivered by Grant Spencer from 2016, from their website here https://www.rbnz.govt.nz/research-and-publications/speeches/2016/speech2... which I have posted before.

Does Mr Orr feel that by warning speculators will stop leveraging.

Mr Orr, no time for warning but to act and act soon. Damage has already been done by your action but still as the saying goes better late than never.

Or is he using the classic 'sale ends soon' message to provoke more speculators into action.

12
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This country was bad enough when all anyone talked about was rugby and cars but it’s much worse now that everyone only wants to talk about houses.

I'd say it's the insufferable cultural legitimacy police that are worse, but maybe that's just me.

15
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Another dazzling display of intelligence from the reserve bank. Who could have possibly forseen this state of affairs?

The LVR's or DTI's need to be (re)-introduced... NOW, not in six months time when we are even further up s*** creek without a paddle and a whole lot more "innocent first home buyers" have been suckered into the ponzi without any equity. The re-introduction should also be immediate and without warning to prevent an idiotic scramble to beat them.

The RSV (rent seeking vampires) should also be made to require hard cash instead of "equity" when expanding their slumlord empire.

Different rates for investors and buy to live. Investors at 7%... but to live at 2.5.. Job done. Remove te ability of remortgaging the family home to buy another property unless it is at the higher rate Job done.... so easy to solve this problem if you want to solve it.