From Banking Day, the RBNZ has high hopes for the efficacy of its new LVR rules:
The bank’s regulatory impact statement on the speed limit announced on Tuesday said the Reserve Bank’s modelling suggested the limit could reduce credit growth by 1-3 percentage points in the first year.
Mortgage lending grew 5.4 per cent or NZ$9.3 billion in the year to June, suggesting a fall in the growth rate to 2.4 per cent would have seen mortgage growth NZ$5.1 billion lower if the speed limit had been applied over the last year.
“This reduction is likely to come about through a combination of slower housing market turnover, reduced house prices and higher average deposits for house purchases,” the bank said.
The bank said its modelling also suggested that house price inflation could be one to four percentage points lower over the first year of a policy where the mortgages with LVRs over 80 per cent were limited to 10 per cent of new lending flows. House price inflation was 16 per cent and 10 per cent respectively in Auckland and Christchurch over the last year.
“This reduction is expected to arise from reduced competition for houses, a direct lowering of the price that some purchasers are able to pay, and reduced house price expectations as a result of the restriction,” the bank said.
Bring it on. Bring it here.