About Us  |   Advertise  |   Contact Us  |   Terms & Conditions  |   RSS Feeds
deposit rates

Higher rates give RBNZ scope to lift LVR rules

Loan-to-value restrictions may be eased as interest rates move back to more normal levels, Reserve Bank deputy governor Grant Spencer says.

Friday, 28 March 2014

by Susan Edmunds

In a speech to the Credit Suisse Asian Investment Conference, he said the Reserve Bank had made it clear from the beginning that the restrictions were not meant to be permanent.

The current cycle of OCR tightening might have had to have been sharper without the rules, he said, but now it was under way, it could give the Reserve Bank scope to lift the restrictions.

Since October, banks have been able to lend no more than 10% of their new loans to borrowers with a deposit or equity smaller than 20%.

“To be clear, the monetary policy tightening cycle that is now under way is motivated by the need to ensure that CPI inflation remains in the vicinity of 2% over the medium term. The boost to financial system resilience provided by the LVR restrictions, as well as a decision to increase risk weights for high-LVR housing lending, has meant that monetary policy has not needed to consider a tightening for financial stability purposes," he said.

"However, while not motivated by the financial stability objective, the monetary policy tightening is expected to help in dampening further house price inflation. In this regard, as interest rates move back to more normal levels, we will expect to have greater scope to ease or remove the LVR restrictions.”

He said the Reserve Bank expected to lift the restrictions once pressures in the housing market had moderated and it could be confident there would not be a resurgence in house price inflation.

“A decision to ease or remove LVR restrictions will ultimately take into account both the financial stability and price stability implications of doing so. We will be alert to the risk that the removal of LVR restrictions could produce a resurgence in house price inflation, which would potentially undermine both financial and price stability."

Spencer said the rules seemed to have had the effect intended.

It had been estimated that the LVR restrictions would dampen annual house price growth by one to four percentage points and house sales by 3% to 8%.

“The evidence to date suggests that the dampening effect of the LVR restrictions on house prices has been broadly in line with these expectations.”

Comments from our readers

On 28 March 2014 at 1:20 pm Amused said:
“The evidence to date suggests that the dampening effect of the LVR restrictions on house prices has been broadly in line with these expectations.”

Great to see the academics at the Reserve Banking telling themselves these LVR restrictions have achieved anything of worth. Frankly it seems to have been nothing less than an open invitation to non resident investors to come in and buy up large in central Auckland.

Sign In to add your comment


Printable version


Email to a friend
Newsletter Signup

Weekly Updates including news and commentary

Today's Best Bank Rates
Heartland Bank 2.75
Based on a $50,000 deposit    More Rates »
Today's Top 5 Deposit Rates
NZCU Auckland 3.25 Success Saver
Heartland Bank 2.75 Heartland Direct Call
Westpac 2.60 Online Bonus Saver - Potential Rate
Westpac 2.55 Online Bonus Saver - bonus rate
Heartland Bank 2.50 Heartland Business Call
Based on a $50,000 deposit    More Rates »
Find a Rate
Show me the rates for
invested over
Use the full calculator
Cash PIE Rates
Institution Rate 30% 33%
ANZ 0.10 0.10 0.11
ASB Bank 0.40 0.41 0.42
ASB Bank 0.55 0.59 0.56
ASB Bank 0.60 0.61 0.64
ASB Bank 0.65 0.66 0.69
ASB Bank 0.70 0.72 0.75
BNZ 0.10 0.10 0.10
Heartland Bank 2.25 2.59 2.70
Kiwibank 0.75 0.77 0.88
Kiwibank 1.75 1.81 1.89
Nelson Building Society 3.75 3.90 4.08
RaboDirect 1.00 1.02 1.07
SBS Bank 1.80 1.86 1.94
TSB Bank 1.60 1.64 1.71
Westpac 0.35 0.36 0.38
Westpac 0.10 0.10 0.11
Westpac 2.10 2.16 2.26

More »

Previous News
Latest Trends
Coming Soon

Disclaimer - Every possible effort has been made to keep the information in the tables and on this site as accurate as possible, however, neither the publisher, Tarawera Publishing, nor anyone engaged to compile the rates and this site accept any liability for inaccuracies or any loss suffered as a result. It is strongly advised that readers check loan details with providers. The full terms and conditions of this site can be found here.

© Copyright 1997-2017. Tarawera Publishing Ltd. All Rights Reserved.