New Zealand's key development from RBNZ - Westpac

Analysts at RBNZ explained that the key development last week was the announcement of tighter mortgage lending restrictions by the Reserve Bank.

Key Quotes:

"Once again, property investors were firmly in the RBNZ’s sights, with the Bank effectively capping lending to investors at a maximum of 60% loan- to-value ratio (LVR) nationwide (previously there had only been restrictions on lending to Auckland investors).

The nationwide speed limit for owner occupied lending was also lowered. No more than 10% of new lending is now permitted to have an LVR greater than 80% (previously the limit was 15% of new lending outside Auckland).

The RBNZ announcement said the new policy is effective from 1 September, but it also said that it expected the banks to “observe the spirit of the new restrictions in the lead-up to the new policy taking effect”.

Clearly the banks were listening, with the new restrictions already being enforced by all four major banks.

Potentially that’s not the end of the road yet when it comes to restrictions on mortgage lending. In Tuesday’s announcement, the RBNZ reiterated that restrictions on debt-to-income ratios are under development and could be introduced next year."