NZ mortgage debt growth falls as macroprudential bites

By Leith van Onselen

The RBNZ has released several pieces of data suggesting that the RBNZ’s recent loan-to-value ratio restrictions targeting investors has been successful in cooling mortgage demand amid record population growth.

As shown in the next chart, New Zealand household borrowing continued to retrace sharply, recording annual growth of 7.1% in July:

Most of New Zealand’s household debt is driven by mortgages, which has also retraced sharply to 7.1% in the year to July 2017:

Finally, the ratio of household debt to household disposable income remained dead flat at 168% as at June 2017:

The RBNZ’s LVR restrictions officially came into effect on 1 October 2016, although banks began informally applying the rules since they were first announced in mid-July 2016. They appear to be working.

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  1. debt growth falls

    ie debt continues to grow

    There is no other way that the money supply, and hence the economy, can grow without it

    • Yes – but there is good debt and bad debt.

      Any reduction in bad debt – a reduction in interest bearing private bank credit creation – can be replaced by an increase in good debt – non-interest bearing accounting entries made by the central bank to cover a difference between government expenditure and revenues.

  2. It makes sense to have the Central Bank responsible for credit creation regulation to avoid the problems we have with the RBA and APRA dancing around the issue, but even then, changes to those regulations should be announced publicly the same way as interest rate decisions.

    Credit creation regulation can have a powerful effect on asset prices and care should be taken not to give insiders market moving information.

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