Reserve Bank makes surprising announcement on move to reinstate lending restrictions in face of searing housing market; has also announced further delay in introducing new bank capital requirements till 2022

Reserve Bank makes surprising announcement on move to reinstate lending restrictions in face of searing housing market; has also announced further delay in introducing new bank capital requirements till 2022

The Reserve Bank's made a shock announcement that next month it will consult on the possible reintroduction of high loan to value ratio (LVR) lending limits on banks early next year - and concedes it is now observing "rapid growth in higher-risk investor lending".

The move, to reintroduce the LVRs in March, is in effect a screeching u-turn by the central bank and goes back on its commitment to have the LVRs lifted for at least 12 months. It will inevitably lead to questions about whether the RBNZ may now go back on its previously announced - and reiterated - commitment to leave the Official Cash Rate unchanged at 0.25% for 12 months - so, till at least March next year

The RBNZ also on Wednesday surprisingly announced it is further delaying the introduction of new bank capital requirements till July 2022. These were initially delayed earlier this year to 2021.

The shock value of the LVR announcement is its timing, which is very surprising ahead of two major set piece normal RBNZ announcements, namely the latest Monetary Policy Review to be made later on Wednesday and the Financial Stability Report due in two weeks.

By rushing the announcement out now the RBNZ is signalling through its actions that the housing market is clearly getting away on it.

The RBNZ lifted the LVR restrictions in May of this year, supposedly for at least 12 months.

The LVR restrictions - originally put in place in 2013 - are used to reduce the risks to financial stability from higher-risk lending. At the time they were removed the LVR restrictions called for investors to have 30% deposits for houses, while in terms of lending to owner-occupiers the banks were limited to only 20% of their new lending for loans in excess of 80% of the value of a property.

The decision to remove LVRs always appeared extremely risky.

In the statement from the RBNZ on Wednesday Deputy Governor Geoff Bascand said the decision to remove the LVRs earlier this year had been made "to best ensure credit could flow, and that they did not have an undue impact on the mortgage deferral scheme implemented in response to the Covid-19 pandemic".

“Circumstances in the lending market have since improved and we are now observing rapid growth in higher-risk investor lending. We will consult about re-instating the restrictions we had in place pre-Covid, which limited the amount of high-risk lending that banks could make,” Bascand said

The very surprising thing about both announcements is that they come ahead of the RBNZ's scheduled Monetary Policy Review on Wednesday and just two weeks ahead of the next scheduled Financial Stability Report - which would normally be considered the forum for dealing with issues such as the LVRs and bank capital.

The twin announcements from the RBNZ would suggest great urgency on its part and acknowledgement that the housing market is starting to seriously overheat. 

RBNZ Governor Adrian Orr had fired warning shots last month that the central bank was looking at the possibility of reintroducing the LVRs. Since then, however, the housing market has looked to be getting hotter and hotter. 

Meanwhile, the RBNZ also says its moratorium on banks paying dividends and redeeming bonds, put in place in April, will continue until at least March 31 next year "to support the stability of the financial system."

Additionally the RBNZ has written to insurers telling them it expects they will only make dividend payments if it's prudent to do so, having regard to their own stress testing and elevated risks in the current environment.

This is the announcement from the RBNZ:

The Reserve Bank – Te Pūtea Matua is further delaying the start of increases in bank capital until 2022 to allow banks continued headroom to respond to the effects of the COVID-19 pandemic and to support the economic recovery.

This delay supports other actions the Reserve Bank has taken to cushion the initial economic blow of COVID-19 by promoting cash flow and confidence in the financial system.

“The Reserve Bank’s actions throughout this period have promoted monetary and financial stability and provided broad support to the Government, financial institutions and New Zealanders,” Reserve Bank Deputy Governor and General Manager Financial Stability Geoff Bascand says.

“COVID-19 has emphasised the importance of buffers in the financial system. The more capital a bank holds, the better it can weather economic storms and meet customer needs during tough times.

“Delaying the implementation of parts of the Capital Review decisions by a further 12 months strikes the right balance between providing more headroom for banks to support lending now by drawing on their capital buffers, while also ensuring that capital levels lift in the longer term to support financial stability.”

The Reserve Bank remains committed to increasing capital requirements in the medium-term to underpin financial stability, Mr Bascand says.

The changes mean the increase in the Prudential Capital Buffer will not begin until July 2022. The Reserve Bank will reconfirm this timing near the end of 2021, and will consider making further amendments to the timing if the conditions warrant it. Other aspects of the capital reforms will proceed from 1 July 2021, including the new rules around capital instruments. More detail on this will be released on November 17.

Reserve Bank will consult on loan-to-value ratio (LVR) restrictions

Meanwhile, in December, the Reserve Bank will consult about re-instating loan-to-value ratio (LVR) restrictions on high-risk lending with effect from 1 March 2021.

LVR restrictions are used to reduce the risks to financial stability from higher-risk lending. The restrictions were removed in May to best ensure credit could flow, and that they did not have an undue impact on the mortgage deferral scheme implemented in response to the COVID-19 pandemic.

“Circumstances in the lending market have since improved and we are now observing rapid growth in higher-risk investor lending. We will consult about re-instating the restrictions we had in place pre-COVID, which limited the amount of high-risk lending that banks could make,” Mr Bascand says.

Bank Dividend restrictions will remain in place

The Reserve Bank is also announcing that the restrictions on dividends and redeeming non-Common Equity Tier 1 (CET1) capital instruments put in place in April 2020 will be retained until 31 March 2021, or later if required. This will continue to support the stability of the financial system.

Reserve Bank updated expectations on insurer dividends

The Reserve Bank has also written to insurers to advise it has updated expectations on dividends. The Reserve Bank expects that insurers will only make dividend payments if it is prudent for that insurer to do so, having regard to their own stress testing and the elevated risks in the current environment.

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114 Comments

13
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time to slam the stable door, whoops.

There's a silver lining to higher house prices "BIRTH CONTROL" My partner and I have decided not to have children, it's just not affordable any more. I've booked my vasectomy procedure for next month. A lot of my friends have had it done and they too, have chosen to be childless couples. Apparentley the surgeons have never been so busy, especially for caucasian male customers. In fact they say it's becoming trendy, a lifestyle choice you could say. So keep up the good work RBNZ.
... (using sarcasm to drive a point)

37
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Classic 'sale ends soon' marketing technique.

16
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Exactly, what you would expect from this announcement is more people rushing into the market before it ends.

38
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It would be interesting to know why they think it would be a good idea to let the house burn until March.

35
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agreed. they removed them more or less overnight, as i recall. but somehow putting them back takes at least 4 months.

How's ya memory ? They will generally tell banks to act in accordance with new limits immediately even though official start date is March next year.

Mortgage brokers and banks have been filling their boots - demand like nothing anyone has seen - if you haven't got your high LVR lending app in already then 2 weeks turn around most likely will see you miss out.

And it's clear the "investors" taking on high LVR lending are typical mum and dad investors with say a first home who have got caught up in the hype after they just got over their toilet paper buying binge - Serious investors would be 50% equity plus and most likely not participating in the current madness, and certainly not in a way that extends oneself; rental maintenance/compliance costs are through the roof so current yields are for suckers -

Already talk of 10 year US bonds ticking up over 1% as vaccine looks promising and central banks looking more likely to reverse current stimulus as opposed to everywhere going negative as had been the consensus; 5% net yield MIN or forget about it.

If it is in fact de facto effective immediately, that would be good news.

27
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The RBNZ are now in clear breach of the part of their mandate related to preserving the soundness and stability of the NZ financial system. Orr must be dismissed immediately.

Agreed. I do not understand the reasoning or logic here.

Having determined that the housing market is running super hot, and acknowledging that they're seeing a rapid rise in risky high leverage loans (that the so called conservative banks seem happy to lend on by the way) - rather than re-implement LVRs, which any logical person would never have removed in the first place, they put out an announcement that they'll consult for x months on whether or not to re-introduce them?

I do wonder whether Orr was about to do just that, but Robertson stepped in and told him he had to consult. That is after all Labour's playbook right? That would also explain why Orr sent the deputy to announce it - because he's been forced into 'consulting'.

I do find it strange that all the noises were that LVRs were coming back, and soon, and Robertson has a meeting with Orr last week and suddenly it's we're going to consult.

Either way it's a poor decision by Orr - either he should have stood up to the politico's and asserted RBNZ independance on this or he should have fronted and explained his reasoning. Both way's he comes off as looking weak here - and both ways likely lead to his exit.

The question is, what does Labour/Robertson get out of letting the housing market run rampant?

@Polygonalvector . I think labour is trying to keep all the national supporters that changed to labour happy and to prove they are just as good with the economy as national , they are now not really a left winged government due to Covid

@Polygonalvector . I think labour is trying to keep all the national supporters that changed to labour happy and to prove they are just as good with the economy as national , they are now not really a left winged government due to Covid

Wow... terrific reasoning

40
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"Shock" announcement?
What is shocking is the RBNZ's utter disregard for the financial stability of NZ banks. They should have already re-introduced LVR restrictions for speculators. Actually, they should have never removed them in the first place.
Moreover, they will only wait until next month, and only "consult", and possibly re-introduce them only next year, in March ?? Shambolic and inexcusably reckless.

20
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Shambolic and reckless are great words to describe them. Clowns.

12
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Moreover, they will only wait until next month, and only "consult", and possibly re-introduce them only next year, in March

Adrian Orr didn't front for this media release. He sent the deputy instead. Delegating responsibility or realizing this central banking stuff is no walk in the park and he's possibly out of his depth?

It would be nice to see at least the banks themselves be responsible for their financial stability.

The irony of course is the banks have been great looking after their own interests, usually recording record profits.

The reality with the high LVR lending is the banks will have crossed collateralized any extra equity security needed, and then some with other property that does have plenty of equity. The risk will be all on the borrower.

And some of that risk sits with the depositors too.

"What what they do, not what they say."

Easier said than done with the NZ ruling elite. It's like watching a kid remove training wheels prematurely.

14
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Reinstating LVR controls is not going to undo the damage already done - it’s going to lock it in.

I guess theoretically, it will temper demand. How effective that will be remains to be seen. Personally I think it will slow growth but not stop it. Housing in Auckland was already sizzling since late 2019. The RBNZs actions in March just poured jet fuel on the fire. DTI restrictions and ban investors from buying existing stock unless they have plans to build additional units in the short term is the sort of thing that would actually make a difference.

That will lock in the “winners” (investors who already have investment property) and lock out the losers (aspiring investors looking to get a head)

Yeah potentially. The idea is to stop buying up current housing stock to hold as cash cows. The only losers are aspiring investors. For making existing houses cheaper for fhbs, I'm willing to sacrifice them. If you buy the supply and demand arguement, well, this will kill some demand.

Might not be the only shock from RBNZ today, perhaps a shock rise to the OCR? Bring it on for savers. 10% chance of a rise but would explain them softening us up with the delay in the LVR. Not sure when economists will realise that below a certain level lower interest rates are deflationary. Edited: deflationary as far as CPI goes not asset prices unfortunately.

I'll offer you 10-1 they don't hike rates today dazz, how much do you want to do?

I am in too.

0.00001 of a bitcoin:)

Ok, if they raise the OCR today I'll send you 0.00001 BTC :)

Won't someone think of the poor people who have enough cash in the bank to generate passive returns? Truly they are the real victims here, nevermind the thousands of young families drastically hiking the OCR would financially ruin.

Ahhh the good old human shield defense.

Those young families all borrowed responsibly, didn't embellish their income and were stress tested.

It will all be sweet.

Young families saving for a deposit? Yup will help them. Young families paying off a mortgage? Will prob still be cheaper than the rates they bought at by far and their equity position will be higher then if they bought 6 mths ago or more. Young families renting for life? Tell your kids to save hard, dont get student loans for useless degrees, stay off smokes, drugs and booze and dont gamble so they dont end up in your position. The rest? the longer we leave it the worse for that small group.

I note you don't mention it would disproportionately benefit the investors who drove price increases to insane levels to begin with and have since been able to cash out without ever paying the piper. You threw a good pitch though, I was almost sold.

Nothing you mention can't be achieved in a far more equitable way by reintroducing proper LVRs with carve-outs for FHBs.

21
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Oh my god, how many times - the reason young people are having trouble buying houses is NOT because they don't save hard, or smoke and drink and gamble, or spend to much on avocado or whatever nonsense. It's because houses cost a lot compared to incomes.

Young guy who worked for me for some years on a low wage packing orders recently built a house. He started work straight out of high school. Bought a small inner city section a couple of years earlier. Got a bit of a hand from his Dad show is also a conservative chap but he has also wasted some money changing cars too often. vs his brother who has accounting degree but has an admin job and now pays board to his brother. Got another guy working for me, higher income as skilled labour, 44 yrs old, single and still renting. Its not all about the income people. Its never ever been easy to get on the ladder but those who want to hard enough find a way to do it. If you don't start saving until you are 25 you will find it harder as values are that much higher.

"It's never been easier to get on the ladder" but it has been objectively and measurably much much cheaper, relative to income. This is really beyond dispute anymore - houses cost many times more than the median income than they used to, and no amount of 'lifting yourself up by the boot straps' gets around this basic fact, no matter what you think your anecdata tells you.

Yes, those poor victims with big wads of cash who just can't get a break and live off the interest. Heaven forbid they may need to dip into their cash horde. Poor bastards.

What about all the would be first home buyers saving for a house but the price is moving faster then they are saving. They're still vulnerable to this. And have lots of cash in the bank - relatively.

Salt of the earth Kiwi's

18
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The RBNZ clown act never disappoints.

Three and a half months notice for every man and his dog to pile in.

What do they expect to happen exactly?

Let me guess as a fly on the wall at their latest meeting. I suspect the consensus was something like "let's not create any surprises." Of course, they have limited understanding about behavioral responses. As we all know, the RBNZ doesn't have any behavioral economists onboard. Not one.

11
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It doesn't take a behavioural economist to predict the bleeding obvious.

No. But it's usually a better approach than using the ol' "I reckon" method of modelling desired outcomes.

End the LVRs
End the RBNZ
Free market for all!

Free slave labour for all (rich business owners)!
Tenants works at RBO's business for minimum wage -> Pays 50%+ of their wage as rent to RBO.
...so I hope your comment was sarcasm.

But is the LVR loosening really the main driver on escalating house prices?
There have been eras of 5% deposits and no bubble pricing.

No doubt it is, a lot of people who could not make it into a loan due to already highly unaffordable prices, which before would have required 20% deposit (let's say 150K) can now get loans with barely any savings at all. A common scenario is Kiwisaver funds being withdrawn for a first home purchase which in many cases happen to be just enough for the deposit required by many banks. So basically you end highly leveraged and no pension funds for a house is barely worth the timber is made of in an uncertain economic environment.

I don't think they were. It wasn't a "You must have 20% for owner occupier, or 30% for investor" situation. It was just that banks could only have a limited percentage of their mortgages being higher than 80%/70%. Their introduction was just so the RBNZ could say they were doing something.

But when property values increased by 20% in a year due to lack of supply, high demand, plummeting interest rates, no real alternative asset classes, and a stack of unspent holiday cash, it wouldn't take much to get that 30% equity stake in the next residential purchase.

For owner-occupiers though, they would be looking to upsize, so they would need to see significant increase in value, but at the same time, the properties they would be looking to move to would also increase, so it would be a while before they actually buy.

It would take a lot less time for investors to be in a position to leverage their capital gains of their existing properties to meet the 30% requirement for their next cheap straight-to-rental purchase.

Hence why the bulk of new mortgages have been to investors.

Re-introducing the LVR restrictions as they were initially done will not cool the housing market one jot.

@mortgage belt. Yes but never 5% lending at these crazy interest rates so makes a huge difference

What would any of us do if we thought restrictions to a market we were active participants in were headed our way?
Buy more, or sell?
And if, as a lender, you knew that changes that will affect your back book were coming, would you keep lending 'as normal'?

"March!" could be as good a date as "Tomorrow!" under those circumstances. The only ones that will get hurt are those that don't know or understand ( the media isn't about to tell them!) what's about to or is happening, and that's the unfairness of "March!" being thrown in.
New Zealand has a choice:
Either affect the prospect of a relatively small number of citizens who are speculative property owners today, or damage untold millions of future citizens who will be affected by poor policy decisions also made today.
I was going to write a witty (?!) response to this involving what our fabled Form One Economics class might suggest is going to happen now. But this has gone beyond a joke.
My fear is that today's RBNZ announcement isn't in favour of the future of this country. Not by a long shot.

There is what any of us would do... then there is what the masses of amateur property speculators will do.

Beat the deadline!

Sadly - spot on. Form One Economics at its very best.

The initial aim was to keep transactions happening, as a sudden halt would have crashed the market and take the economy down with it. Removing the LVRs was necessary to stimulate investor activity. Reinstating the LVRs is an admission that they made a mistake - as doing so overcooked things. 4 months lead time is enough to let the transactions flow through from now until March (as again, any abrupt stoppage would cause the top to topple over).

I think they expected the rush of sales to happen in September based on worst case scenario, but NZ has come out of this better than expected (for now). March is when the mortgage holidays end and when we'll see more houses in the market. When they put the LVRs back on for investors, they'll counter it with 5% deposits for FHBs so there isn't a sudden crash in house prices if no one can buy due to not having a sizeable deposit. So if you are an FHB with a stable job, hang tight as March 2021 could be when the deals start coming through.

I think it was Westpac who claimed they aren't using the looser LVR rules. Changing the rules may change things somewhat but the low interest rates are fuel for the fire.

There hasn't been enough time for the flow on effects for all the job losses to be felt in the broader economy. This will start to change at the start of next year, and for the six months after the mortgage holidays end. Hard to say how bad it will be, or if there is enough time for people to find new jobs, start a business or become a student to ride out the worst of it.

But why would it have 'taken the economy down with it'?
With mortgage costs at historical lows, the vast majority of borrowers by far would have just kept servicing their debt. The 'value' of any holding doesn't affect the capacity to repay in the short term.
What would have been affected it the ability of those who relied on capital gains to realise their profit in due course.
It was a massive mistake to encourage New Zealanders to take on more debt during what was seen as a looming economic downturn. Massive.
I don't care what some dated set of textbooks or faded economic 'education' tells me when I look onto the streets of our country and see what we are inflicting on our people.

In the case of this announcement "March!" should not have come into it. There wouldn't have been a crash, as most participants don't believe there ever will be one, and would just have held what they had.
It takes time to build the circumstances for a Crash!! and that is exactly what we are setting the scene for by doing what we are doing today.

Can someone tell or ask why the LVR relaxed during a pandemic or economic downturn ?
Why should they make easier to buy more loans ??

"To keep the house prices rising ; so that heavily indebted household feel confident and doesn't stop spending ; there by keeping the economy floating" . Is that the answer ?

https://brrr.money/ is the short answer.

The idea is to pump as much money into the economy via mortgages to avoid spending halting. Spending is not just confidence, but also you can't spend money that isn't there. In 1929 to 1930s people would have loved to have spent money but there wasn't any.

If you ignore the frothing incels for a moment, there was actually some sound logic in removing the LVR's. The RBNZ did not want the banks in a situation where a fall in house prices inadvertently placed back book loans in breach of the LVR's - so they suspended them.

Notwithstanding that very few countries actually have them and they are far more punitive to first home buyers than those with multiple properties and high equity. But let's make it harder for the young to get ahead, by all means.

Easy answer to all of that ( and I'm not sure LVR's affect the Back Book until it's roll-over time? And even then, it's debatable what affect it will have if the loan is regular)
"Restrict Lending to anything but one property per IRD number"
Let FHBer's compete against each other and not against those who can use phantom capital from past purchases.
There's a number of ways to do that of course. But it isn't LVR's or DTI's that really matter ( as you suggest) but ...access to debt.
Let's use the newly issued debt properly.
"But that's not how Capitalism works! Debt should be allowed to flow to where a borrower wants it to".
All societies have rules. Debt Allocation should be one of the most important.

Go further than that, Restrict Lending to anything but one property per IRD number with an applied Debt to Income ratio (tax paid / 0.67) = income measure.

This would basically deny those in lower tax brackets any chance of ever buying?

Yes, it could deny those in lower tax brackets from borrowing in excess of 10x their gross annual wages for a house. You've obviously not heard of the term "exemptions" and "criteria" before? You know, First Home Buyers being exempt from such punitive policies.

Also, it doesn't necessarily need to be tax paid / 0.67, it can just be a minimum tax amount paid figure based on minimum wage x 40 hours. The goal is to prevent investors from loading up with IRD numbers to circumvent the lending restrictions.

Except they could easily have changed the regulatory requirements without removing the LVRs. Say that they only apply to new loans, and existing mortgages will have their LVRs assessed relative to purchase prices rather than nominal current value.
Equally, applying punitive LVRs to anyone who already owns property is possible. Sure, there are always loopholes for the determined, but most people would rather look elsewhere than take the risk of being caught out.

How would a fall in house prices place back book loans in breach of the LVR's?

Because in an LVR calculation, the V is the house value. A fall in house prices may mean a compliant loan becomes non-compliant and that would have several implications including not being eligible for self-securitisation and being in breach of the RBNZ requirements - potentially leading to the Bank asking the borrower for equity or to terminate.

How is the bank going to know if the value of your house has dropped if you don't sell?

Dynamic revaluation via providers like Core Logic

From the reserve bank i 2016 "High LVR loans now account for 12 percent of banks’ residential mortgage exposures, compared to around 21 percent just prior to the initial introduction of LVR restrictions in 2013 (Figure 2.1). This amounts to a reduction in high LVR (+80 percent) lending of around $20bn. Over time, these balance sheet trends will help to reduce banks’ losses on riskier loans in the event of a downturn in the New Zealand housing market. In so doing, it would facilitate a continued flow of credit through a downturn."

Given we are now in 2020 you would think banks should be in a strong position to weather any down turn.

Does a Refinance trigger an LVR measure? A fall in house prices could create all sorts of problems if a bunch of 80% LVR borrowers come to refinance 2 years later at 95% LVR due to a drop in house prices.

Now you're getting the hang of it.

Reserve bank: "Refinancing of existing residential mortgage loans (switching banks) is exempt from high LVR restrictions, as long as the loan balance does not increase"

I don't think the LVR's apply to people re financing

Anecdotally I've heard people being excluded from special rates when values dropped but I'm able to point you to any specific terms from the banks saying so.

"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"

From the reserve bank in 2016 - 4 years ago. "The LVR restrictions have strengthened bank balance sheets against housing market shocks. The share of banks’ exposures to riskier mortgages has fallen across a variety of borrower types. Nationally, new investor lending at LVRs above 70 percent has fallen by around one third following the 2015 policy changes. It is now largely impossible to borrow more than 70 percent against an Auckland rental property. More broadly, the share of high LVR (+80 percent) mortgages on bank balance sheets has continued to trend downwards. "

You would be a mortgage prisoner of your existing bank. They will set the interest rate relative to your new LVR% and you will pay it. Because no other bank will refinance you.

Exactly.

Isn't refinancing technically creating a new loan, and paying most of it off with the old one? If so, I'd hazard a guess to say yes.

Edit: My guess was wrong

It does not. As long as the loan balance doesn't increase they are not affected:

https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-restrictions-a...

Thank you!

Dunno about how that affects the banks allocation of LVR's, but for sure those borrowers will see their interest rates rise by 2~3%. Partly because they will no longer qualify for the "special" rates, and partly because of the addition of low equity fees, so generally, those close to the 20% equity line could be in a lot of trouble if house prices drop significantly.

Urgent my arse.
Banks setoff hook re capital requirement again.
Meanwhile about to be handed great deal of free lending money by RBNZ, in some new named fund.
Whilst investors much on for another 4 months and inflate risk further whilst FHB cannot compete due to lack of capacity for leverage. "Consult" - why does every body with authority in NZ feel need to "consult". Bloody do something. That is what you are there for.

The verb 'to consult' has many different meanings in the Kafkaesque world of institutional bureaucracy. But what I think is at the essence of the word is a signal to delay any firm action now and to pass the buck so to speak.

I think it means something like: Lets buy ourselves some time by saying we're 'consulting' with various parties, whilst we work out what the f**k we're doing.

Of course it is all to boost confidence in terrible economy.
Except, sorry the economy is in much better shape than thought according to government books released yesterday - $3b better in fact. Unemployment is up 35000 this year. Big deal. It is 10 million in USA.
their pop is 66 times bigger, yes. The equivalent for them would then by 2.31 million unemployed, not 10 million.
NZ has gained immeasurably from having CV19 under control and pop not spending money abroad.
The RBNZ and Robertson have over done it and need to deflate bubble now.
Of course, they won't

The RBNZ and Robertson have over done it and need to deflate bubble now.

Be careful what you wish for. It's very easy to say 'destroy the bubble' but the unintended consequences are probably way bigger than you can imagine. The NZ property bubble is where the boomers' 'fake wealth' is tied up (fake because the prices are simply a reflection of money creation faciliated by the retail banks). They've created the monster and how to deal with it is way beyond what they know.

"They've created the monster and how to deal with it is way beyond what they know."
No argument with that.
But the one thing we surely must know is - feeding the monster isn't going to make it any easier to tame. And as with all monsters, when they get hungry beyond the capacity of the owner to feed it - they eat the owner.

If you mean by 'eating the owner' some kind of economic meltdown, then I agree with you. However, I'm not sure what that meltdown looks like and when it will occur.

Looks like RBNZ has (perhaps inadvertently but it's hard not to be cynical) engineered a classic smash and grab.

1. Remove all LVRs and let 'investors' run amok, massively bidding up house prices yet again on previous equity and leaving FHBs in the dust

2. Realise the risks to the stability of the banking system, slam the doors shut again. FHBs are even further behind on getting a suitable deposit together but hey, all those houses snapped up can be rented back to them at eyewatering rates that mean they can never save fast enough keep up with asset prices.

An unmitigated social disaster.

As I noted above - Form One Economics at its very best.

A non-academic behavioural economist, operating at the business coal-face

This is out of control, Robertson and Treasury and RBNZ have got themselves into a tangled mess that is beyond their control. Nothing they can do about it. Anything they do from here on in will make matters worse

MARCH? Why not sooner?

In March as Mr Orr is reluctantly forced to act as he no more can hide the crisis under carpet and has put March date to potray that is concerned and acting (keep people from speaking) but real intent is missing.

His intention were made ckear by his deputy that they want the ponzi to continue as can think of no other solutions otherwise 20% to 50% plus rise in few months is not possible.

Atleast shohld come out to calm FHB who in FOMO are taking huge risk as all this will come to haunt in future.

This is giving window opportunity for speculators to go on rampage now and this announcenent in short term will add fuel ti fire as many will rush to buy raising the demand.

Is this what Mr Orr is looking for - Give time instead giving narrow window time frame just like they announced swiftly lifting of LVR when were wirried abiut falling house price SO why not now by same logic impliment sooner, as now, it is not fear of rising house price but a reality.

A house in Pakurange, very standard with 665 sqmt land bought last yeat with CV of 880000 for 900000 is niw again in market by negitiation and expectation 1.4 million - understand targetting builders but the logic of more supply will lead to fall in price or stabilize but governments policy instead has made house price more expensive.

I think Mr Orr and Mr Robertson have just created the window for all their paliamentary colleagues to offload there investment properties to the cannon fodder FHBs

Am helping a friend in his house hunt and have observed most (have seen 12 auction agreement and of that 9 were Chinesse sounding name) people selling the house in Auckland are Chinesse name and have mostly purchased between 2016 to 2019 and are offloading now. When check the price that they bought in 2016 was also crazy like saw a house in Shelly park purchased in 2016 for 1055000 and now has a CV of of 1.1 million (so in 2016 paid high price to 2014 CV) are trying to sell at 1.2 million plus (As Auction failed) as have now got this opportunity to offload and many who bought last year are making a real kill and it is category thst Mr Orr and Mr Robinson are catering too by delaying the introduction of LVR or any other tools.

Property purchased last year in September for 900000 below now being sold for 1.350 Million with multiple offer and still Mr Orr is giving more time ...for what

https://www.propertyvalue.co.nz/auckland/manukau-city/pakuranga-heights-...

Above highlights the destruction caused to house prices by action of government and RBNZ....Does anyone care ?

Window of 5 months given by Mr Orr is enough for speculators to ramp up the price further....May be Mr Orr wants Auckland median to be 1.5 million and is pursuing his dream as he can at the cost of FHB who cannot even dream of a house.

$1.35m for that? Wow.

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This just seems like the worst of all worlds. They are going back on their word, and only 'maybe' reintroducing LVRs in 4 months, which will just generate a feeding frenzy over the summer. Would have been better to do it immediately or not at all.
And as someone who has been trying to buy their first home for months now, it just makes me want to cry. It really feels like there is just no point in trying any more. I've been saving my ass off for years, I have a good deposit, I moved to the regions - basically, I've done everything I possibly could. Prices have gone up by at least 100k in the last year. Now it looks like they'll be going up by at least that in the next few months. I'm just screwed. Everyone who bought a house at least a year ago will have enough equity to buy another, and will be desperate to do so before March.

The sooner you start seeing modern day New Zealand as an abusive parent, the sooner it will make sense to leave.

Life is too short and the rest of the world isn't this screwed.

It's horrible isn't it. Made even worse by the absolute glee most of the reporting on it is framed in the media, or almost anyone who talks about it who had the fortune of being born earlier and could buy when prices were at least somewhat sane.

Have you considered going to Australia?

"The "LVR" announcement from the RBNZ would suggest great urgency on its part"

Well then reintroduce LVR now, not in 4 months time.

Unless we can restart immigration at scale then house prices will fall. Hundreds of new builds will be completed in Auckland in the next couple of months. Just drive around with your eyes open. Houses and unit developments are popping up like mushrooms all over the place. The population is at best static. Last 30 days NZ departures exceeded arrivals by 1400. Many of those selling in Auckland now at inflated prices are looking at leaving Auckland for cheaper pastures. Maybe the plan was all along to pump the bubble so prices only fall back to pre covid levels. But those that have jumped in over the last 6 months are most at risk of negative equity.

WestieAJ...So if we do not restart mass immigration we can add house price falls to the long list of benefits to NZ.

Since 1840 the business model of New Zealand has been to increase the value of our land. Due to the demand stimulated by a constant stream of immigration.The Crown, Local Governments and those with access to capital have benefited greatly over that time. All those who have been prepared to enable and continue the process have had power conferred upon them. Those who resist are politically put to one side. Nothing changes. The script is the same we just have different actors playing the parts.

Yes the script will remain the same while either Labour or National are in power. It is all about money. I wish more people would fight to protect us from the scourge of undesirable mass immigration. Surely we can see what it has done to Britain, France, Sweden etc.

I don't think it's about immigration numbers just now. I think there are quite a few people (remember we have 1.5 million kiwis living overseas) are buying something in NZ so they can return here if they need to. They aren't moving here just now. Only buying for later. So they don't show up in the immigration numbers.

This is like expecting the "last orders" announcement in the pub to discourage the drunks from buying one more.

It was removed in a flash, why cant in be reinstated in the same fashion?

What did he think was going to happen if LVRs were removed of cause people are going to max out lending and buy a property especially with interest rates heading down for at least 5 years its a no brainer. The world is in debt and little ole NZ is following

So they're releasing another 28 billion into the economy and at the same time saying they'll do something maybe next March...ever get the feeling you are being conned.

glad to see that our regular RE / investor trolls and DGM's seem to agree that things are way too hot and out of control and the LVR's need to be introduced now rather than allowing another 3-4 months of inferno house prices before doing it. At last, consensus ...........