RBNZ smashes high LVR mortgage lending

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ScreenHunter_1031 Jan. 29 13.53

By Leith van Onselen

Following on from yesterday’s post showing the ongoing contraction in overall housing finance commitments in New Zealand following the implementation of speed limits on high loan-to-value ratio (LVR) mortgage lending by the Reserve Bank of New Zealand (RBNZ), the RBNZ has just released new data showing a dramatic fall in the share of 80%-plus LVR mortgages issued by New Zealand’s banks (see next table).

ScreenHunter_1030 Jan. 29 13.37

According to Interest.co.nz:

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As of October 1, according to new Reserve Bank rules, all banks were limited to committing no more than 10% of their new lending to mortgages exceeding 80% of the value of the property being bought…

In December there was a total commitment of new mortgage lending by the banks of $4.509 billion.

Of this, $4.258 billion was on properties with an LVR of 80% or below, while just $252 million was committed for so-called high-LVR loans (above 80%).

Some $42 million worth of mortgages for loans above 80% but exempt from the new rules were also advanced.

In total the banks’ share of high-LVR lending before exemptions was 5.6% and 4.7% after exemptions…

And those figures compared with 12.7% (before exemptions) and 11.7% (after exemptions) for October.

This is obviously more evidence that the RBNZ’s macro-prudential controls on mortgage lending are working to cool the New Zealand housing market, and comes on top of the sharp falls in home sales and housing finance commitments recorded earlier.

Well done RBNZ. Now, if only the RBA/APRA would take note…

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.