The Reserve Bank expects to have further limits on risky property lending ready to go next year, but has hinted they may not be needed.
Photo: RNZ / Nate McKinnon
The central bank has been consulting on proposed debt-to-income ratios (DTIs) and setting minimum interest rate tests to see if borrowers can afford rising rates.
The government last year gave in-principle approval of the DTIs, which measure debt serviceability against a borrower's income, but with the proviso they be designed to [. https://www.rnz.co.nz/news/business/444870/debt-to-income-ratios-will-have-limited-impact-on-first-home-buyers-rbnz minimise the impact] on first home buyers.
RBNZ deputy governor Christian Hawkesby said research backed the view that property investors would be the most affected and first home buyers the least by such controls.
"Our modelling indicates that first-home buyers would be the least impacted by a DTI restriction, with investors impacted the most as they tend to borrow at higher DTIs than other groups on average."
DTIs are a measure of debt serviceability, requiring lending to be matched to the income of the borrower. For example if the DTI was set at five, a person with an annual income of $100,000 would be limited to $500,000 of borrowing for a property.
Submissions showed a split of opinion with banks and property investor groups largely opposed, arguing that various measures such as loan to value ratios, tighter credit rules, and tax changes for investors were all having an effect and DTIs would add further complexity.
However, community housing groups and the general public backed DTIs, but concern was expressed that further restrictions might reduce rental housing stock.
Hawkesby said DTIs should be finalised towards the end of the year ready for implementation, "if required", from the middle of next year.
He said a further proposal to set stress test standards to assess whether borrowers could cope with rising interest rates were not necessary at the moment.
"Banks' test interest rates have begun to rise in line with market rates, and we expect to see a slowdown in high-DTI lending over the coming months ... we are monitoring the situation closely and do not rule out this option if there is a resurgence of risky lending in the housing market."