New Zealand Banks Urge RBNZ to Delay New Lending Restrictions

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New Zealand banks are calling on the Reserve Bank to delay implementation of new mortgage lending restrictions such as debt-to-income ratios as the housing market cools. Existing restrictions and rising interest rates are already slowing home-lending growth, and banks are concerned the introduction of further limits could have “unintended consequences,” the New Zealand Bankers Association said in a submission to the RBNZ posted on its website. It urged the central bank to assess the impact of market changes before using additional tools. New Zealand’s booming housing market last year prompted the RBNZ to begin consulting on the introduction of new lending restrictions to reduce financial stability risks as borrowers took on increasingly large amounts of debt. The RBNZ has said DTI ratios, which would tie the amount a person could borrow to their income, could be imposed by the fourth quarter of this year. However, the housing market is now showing signs of slowing and economists expect prices to fall this year and next. Current lending restrictions include loan-to-value ratios (LVRs), which limit lending to people with low deposits, and the Credit Contracts and Consumer Finance Act (CCCFA), which imposes additional obligations on lenders to review a client’s ability to service a loan. Read more.