The Reserve Bank (RBNZ) has confirmed restrictions on banks' low equity mortgage lending will be loosened from June.
Restrictions on high loan-to-value ratio (LVR) residential mortgage lending set a ‘speed limit’ on how much new low-deposit lending banks can do.
From Thursday, June 1 banks will be allowed to do up to 15% of their home lending with LVRs above 80% for owner-occupiers, and 5% of lending for loans with LVRs above 65% for investors.
Currently there's a 10% limit for loans with LVRs above 80% for owner-occupiers, and a 5% limit for loans with LVRs above 60% for investors.
The RBNZ announced the proposed change in late April. Unsurprisingly banks have embraced the loosening of lending restrictions following consultation.
“In making this decision it is important to reiterate our assessment that the risks to financial stability posed by high-LVR lending have reduced to a level where we believe the current restrictions may be unnecessarily reducing efficiency,” RBNZ Deputy Governor Christian Hawkesby says.
"The previous LVR settings were put in place November 2021 when risks were elevated. The restrictions built resilience in the financial system, which has been evident in the past year as house prices have fallen without widespread impacts to financial stability."
Both house sales volumes and prices are down significantly since November 2021. The Real Estate Institute of New Zealand (REINZ) House Price Index is down 17.6% since November 2021. At just 4262, April sales volumes were the lowest for an April month, excluding 2020, since the REINZ began reporting sales in their current format in 1992.
39 Comments
Like I said some many week ago.
Next question: When will the first cut in the OCR come?
I was saying "signaling" before the election and the cut before Christmas or just after. Now between March and June 24 to avoid another winter like the one we're going to have.
That's a valueless statement without more context, aka why you think that.
My context Many posts on here and in other press highlight the moaning from spec land is about the incrreasing lack of tax deduction. Taking that noise at face value, its clearly important. DTI when implemented will have a massive effect, because, lets face it, its impossible for rents to increase by enough to support the amount of debt loaded up by speculators in their quest to eliminate tax.
I take it you are not a fan of DTI, feel free to explain...?
Oddly I would find that it would be a simple and cynical person that would claim that somebody else is simple and cynical.
Seems like they are trying to fix their mistakes on the sly, without having to admit how badly they messed everything up. Agree it is like they have no end goal, but then again if they did maybe that would cause too much market disruption as the cards on the table would all be flipped and the next moves would be too obvious (i.e. sell/buy/hold).
Its one thing to lower the LVR, its another thing for a bank to take that risk and a third thing for a person to want to take the debt on at current levels....
They are trying to make it easier to buy as BUGGER all people are interested in buying, you can smell the fear.... another 25% and those provisions go up from 800 mil to a couple of billion
If the inverstion in yield curves is correct, and we're heading into a recession, why would the government regulator for financial stability want to increase the amount of mortgage debt being issued relative to incomes?
It doesn't make any sense - it is all back to front logic.
If a recession is inbound, you want to minimise the quantity of debt being issued relative to income in order to reduce the severity of the slow down in the economy (i.e. prevent people from defaulting on debt or getting into mortgage stress).
Our regulators are living in lala land.
Yeah pretty insane.
I actually think that they are panicking. That’s why it all seems so illogical. Look at what we have seen in the last few days:
- softer ocr than expected, suggesting they are done or nearly done
- “forecast” we will see smaller drop in housing than previously forecasted as we head into recession??
- Reduce lvr restrictions today
Looks like we will be first to cut rates lol.
Yes in a recession earnings drop so it is foolish to increase debt just prior to the anticipated event - unless you are a debt speculation junkie supporter which doesn't solve the issue/s we have - it only makes them worse.
Our problem - far too much residential property debt relative to our producitivty/incomes. Think it is 5x GDP which is insane. Why you would, as the financial regulator, want to take actions to increase or sustain that level of debt is completely beyond me.
Someone is pulling the ripcord...
The housing market is already dead and with a lot more people rolling over to very high mortgages over the next year (1/3 more) they need to try to engineer a slightly softer landing ...
Trying to encourage people to buy houses while they still have 12 months+ to drop is probably not the ideal solution now tho - but they are probably trying to pacify their boss (chippy/nats took a pounding in the polls) and the banks (their future bosses if they keep them happy).
"they need to try to engineer a slightly softer landing ... "
Which is what they did in 2020 - 2021! (removing LVRs, emergency rate cuts, allowing interest only loans) And now some of those buyers find themselves in negative equity, a large debt burden, and rising rates.
Madness - it is literally using new FHBs as cannon fodder for older rich people/property investors to protect their asset prices as opposed to just letting the market fall back to sustainable levels of debt relative to our productivity/incomes.
Nah. The current interest rate settings añd stress tests will preclude 90% of potential FHB from even thinking about buying.. and apparently the rates are high for at least a year. In that time prices will fall. At the end of that period even we will think rbnz needs to stok the dead as housing market.
All looks pretty good to me. End of this cycle is near, we are around the long term average. There will be some nice bargains over the next 12 months but remember, as in the past, the recovery will be mixed. I will look for bare land, preferably titled sections in areas with potential. Reminds me of 2013 so you will need to be patient. Happy investing.
Banks are "fishing for the greater fool".
As the last governor of the RBNZ declared in a moment of frankness,
"The stability of the financial system depends on those willing to step up and borrow".
Banks happily throw borrowers under the bus for their own profit and survival of the system, the lifeblood of which is the continuous creation of money.
And look at the machinations in Oz to keep the Ponzi alive. Take a few positive sale indications from the blue chip suburbs of Sydney then desperately parlay it into FOMO on the hellboxes of the outer west...Doomside, Bonnyrigged etc. The media over there is beyond disgraceful along with their slimy lizard skinned agents. Perhaps we're a little brighter and won't dive for the sinkhole so much. Fingers crossed.
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