The Reserve Bank was allowed to add debt-to-income ratio restrictions to its toolkit. Photo / Fiona Goodall

The government has agreed to add debt-to-income lending restrictions to the Reserve Bank’s toolkit, but on condition that any implementation minimizes its impact on first-time homebuyers.

The Reserve Bank has been keen to add the restrictions, which would cap the amount a person can borrow based on their income at a certain multiple, to their tenure for years, but so far have not received government approval.

Today, the RBNZ said in a statement that it and Finance Minister Grant Robertson had agreed to add restrictions on debt servicing to its memorandum of understanding on macroprudential policy.

Last month, the Reserve Bank provided advice to the minister on debt-to-income ratios and interest-only mortgages.

Its analysis found that debt service restrictions were probably the most effective tool that could be deployed by the Reserve Bank to support financial stability and house price sustainability and would complement existing loan ratio restrictions. /value.

It also showed that the restrictions would affect investors more while having limited impact on first-time homebuyers.

The Reserve Bank said Robertson has agreed to add the restrictions to its toolbox on the condition that any implementation is designed to avoid the impact on first-time homebuyers as much as possible.

“We will now work with the Treasury to update the wording of the MoU, which will need to be approved by the Minister.”

Reserve Bank governor Adrian Orr said he did not have a mandate to directly target house prices, but his financial policy tools could help ensure prices do not deviate too much. sustainable levels.

“We believe that a ‘sustainable house price’ is the level to which the price is expected to move over several years, reflecting the underlying drivers of housing supply and demand, including population growth, construction costs, land supply and interest rates. “

Orr said the Reserve Bank will discuss with industry over the coming months the feasibility of implementing debt-to-income limits and other debt-service restrictions.

But any decision on the implementation of debt service restrictions would first include a full public consultation accompanied by a regulatory impact study.

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This notice was published: 2021-06-15 22:50:40


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