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Photo: 123RF

The Reserve Bank (RBNZ) has tightened loan-to-value restrictions in a renewed bid to cool the housing market.

The new limit meant only 10 percent of banks' new home loans can go to buyers with a deposit of 20 percent or less.

The previous limit was 20 percent of all new mortgages.

RBNZ deputy governor Geoff Bascand said that current house prices were unsustainable and threaten the country's economic stability.

"Restricting high risk lending will help prevent these problems getting worse," he said.

The Reserve Bank had been consulting stakeholders about the proposal over the past couple of weeks.(external link)

It support for the changes had been largely supportive, with respondents recognising the need to further tightening to control house price inflation and mitigate potential risks to financial stability.

"Feedback from members of the public was mixed, with some submissions supporting the proposals, and others questioning the need for further restrictions or arguing for other policies to protect the financial system," the RBNZ said.

The tighter restrictions were due to come into effect 1 October, but have been delayed until the beginning of November due to the disruptions caused by the latest lockdown.

READ MORE(external link)

RNZ. (2021). Reserve Bank takes action over 'unsustainanle' house prices. RNZ.

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