Mortgage lending rules are to be toughened after the government has given the Reserve Bank approval to tighten loan-to-value ratios and move to bring in debt-to-income ratios.
In a statement, Finance Minister Grant Robertson said the central bank would start consulting reducing low deposit lending by banks to no more than 10 percent of their total lending from the current 20 percent. The measure would come into force on 1 October.
The government has also given RBNZ approval for debt-to-income ratios or interest rate floors, to ensure borrowers can afford to service mortgages.
“This change will ensure that the Reserve Bank has the flexibility to respond to emerging financial stability risks and deploy appropriate tools as required,” Robertson said.
He said debt-to-income ratios would be designed to minimise any negative effect on first home buyers, with consultation starting in October.
The moves followed changes made at the start of the year to…