In response to the LVR changes announced today by the Reserve Bank, the New Zealand Bankers’ Association said that banks will work to meet the new obligations but warns that demand side initiatives are only one part of the solution.
“We look forward to seeing more detail on the proposal and working with the Reserve Bank to help ensure the policy changes can be put in place and meet their aims,” said New Zealand Bankers’ Association Chief Executive Kirk Hope.
“Our members are committed to meeting their obligations as registered banks and will comply with any new lending requirements.
“It’s difficult to be too specific about exact implications at this stage, without having worked through the details. It is likely though that this will make borrowing tougher for residential property investors in the Auckland region.
“In particular we welcome the Reserve Bank’s decision to increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent. This is a positive move and recognises the very different housing market conditions outside of Auckland.
“It’s important to note though that macro-prudential measures such as those announced today are to ultimately going to be limited in their impact on the Auckland housing market.
“Credit growth is currently around 5 per cent, which is not high in comparison to pre GFC credit growth of around 16 to 18 percent. The real issues driving housing affordability in Auckland are the lack of housing supply, and strong inward migration, not the availability of cheap credit.
“We support sensible measures that help address the supply problem, and it’s important to realise that demand side initiatives can only play a limited role in addressing the underlying drivers of the Auckland housing market.