Framework for imposing restrictions on high-LVR residential mortgage lending

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Reserve Bank of New Zealand

The New Zealand Bankers’ Association (NZBA) is grateful for the opportunity to comment on the proposed framework for imposing restrictions on high-LVR residential mortgage lending. NZBA would like to make a number of high level comments. A number of our members will also be providing you with separate submissions.

NZBA would like to reiterate the industry’s concerns around the use of LVRs to cool housing markets. As previously submitted, deploying the LVR tool may not curb asset price growth or provide greater stability as intended. Furthermore, as the Reserve Bank has noted there may be unintended consequences as a result of implementing this policy.

If this tool is to be used, NZBA emphasises it is essential that:

  • the regime is as simple to implement and workable as possible, and
  • the industry is given adequate time to implement the necessary changes.

Implementing the proposed solution is likely to be complex and costly due to the systems and business process changes which will be required. If the regime is further complicated, for example if there are a number of exemptions and reporting requirements involved in the solution or if definitions are unclear or changed during the implementation or post implementation stages, changes required will be even more challenging to implement.

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