New Zealand Prime Minister Bill English. (Source: Reuters Image) Related News
New Zealand Prime Minister Bill English this week signalled the central bank should consider removing mortgage lending restrictions as the country’s red-hot housing market cools. English, who’s National party faces an election next month, also ruled out adding further lending curbs based on debt-to-income (DTI) ratios, a measure the Reserve Bank of New Zealand (RBNZ) has long wanted to add to its toolkit. The comments came just before the central bank’s public consultation on the DTI rules closes on Friday. New Zealand house prices have been among the fastest-growing in the developed world in recent years.
The RBNZ – alarmed by the financial stability risk posed by the rapid rise in property values – tightened rules on loan-to-value (LVR) limits last year and house price inflation has since tapered off.
English said on Tuesday that he had highlighted to the central bank that the rules were meant to be temporary.
“If you bring something in as a temporary measure, then they should be clear about what’s involved in removing them,” English said on Tuesday afternoon, according to Fairfax media.
The Prime Minister added that the central bank was independent and he could not control its decisions, though he had raised the issue in meetings with them.
Economists and real estate agents have also suggested the RBNZ rethink its LVR limits after data showed home sales volumes plummeted by almost a quarter in July.
That month prices rose just over 3 percent on an annual basis, a sharp slowdown from the start of the year when the market raced ahead at a double-digit pace.
Nevertheless, the RBNZ, concerned that the moderation might be temporary, has asked the government for DTI limits to be added to its macroprudential arsenal.
“If there was a need for it then we’re open to it, but we don’t see the need at the moment,” said English, according to Fairfax, adding the government would not be looking at the issue before the election.
The comments are a rebuff to the central bank, which just last week reiterated it would like to have the new tools available in case house prices take off again.
The bank said it would consider the submissions received after its consultation process closes on Aug 18 and pointed out that international bodies such as the International Monetary Fund have also said the DTI tools should be available to insulate the banking sector from high-risk loans.
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