From Banking Day:
The Reserve Bank of New Zealand has agreed a memorandum of understanding with Finance Minister Bill English that will give the bank the power to limit low equity mortgages as soon as July.
…”These new tools…can promote financial stability by helping to build capital buffers and reduce incentives for speculative behaviour, which can contribute to boom-bust cycles in credit and asset prices,” Wheeler said.
The four tools agreed are all in line with the RBNZ’s March proposals, including adjustments to the ratio for core or stable funding, a counter-cyclical capital buffer, capital overlays for lending in certain sectors and restrictions on high loan-to-valuation ratio mortgage lending.
Restrictions could include limits on the share of high LVR lending banks could undertake as a percentage of total lending, as well as outright restrictions on the proportions of equity required for a loan.
The RBA’s excuses are running short. The pilot program with Australia’s own banks is now up and running in New Zealand. If our lower rates do send property barmy (which I still doubt given the likelihood of rising unemployment and a structural shift in the consumer) then the RBA should be ready to move forward on our own similar tools.
We’re behind the curve but thank God for the Kiwis!
