RBNZ eases LVR restrictions a little - Westpac
The Reserve Bank of New Zealand has shown a willingness to ease lending restrictions as housing market risks diminish, according to Michael Gordon, Senior Economist at Westpac.
Key Quotes
“The Reserve Bank has announced a modest loosening of the loan-to-value limits for housing lending, taking effect next year.”
“Risks to the financial system have diminished as house price and credit growth have slowed. The RBNZ is prepared to ease the lending restrictions further if these metrics remain in check.”
“A range of new Government policies are aimed at cooling housing demand, diminishing the risk of a resurgence in house prices next year.”
“Today’s announcement presents a small upside risk to our housing forecasts, but we still expect house prices to remain subdued in coming years.”
“The Reserve Bank's six-monthly review of the financial system concluded that risks have diminished as house prices have moderated. Consequently, the RBNZ has decided to ease the loan-to-value ratio (LVR) restrictions on mortgage lending:
- For banks lending to owner-occupiers, the 'speed limit' - the allowed share of loans above an 80% LVR - will be lifted from 10% to 15%.
- For investors, the effective LVR cap will be lifted from 60% to 65%.
- The changes will take effect from 1 January 2018.”
“The RBNZ says that the LVR restrictions could be eased further in the future, as long as today's announcement doesn't lead to a resurgence in the housing market or a deterioration in lending standards.”
“We expected some easing in the LVR restrictions by mid-2018, so we were surprised that the RBNZ has moved this early. The momentum in house prices has actually turned positive again in the last few months, and we see a risk of a further near-term bounce, as buyers look to get in ahead of the foreign buyer restrictions and the extenstion of the bright-line capital gain test from two to five years. The easing of the LVR restrictions will provide further support for house prices at the margin.”
“In our recent Economic Overview we forecast a 2% fall in house prices over 2018, as a range of Government policies aimed at cooling housing demand took effect. The earlier than expected easing of the LVR limits muddies the waters somewhat, and we will have to lift that forecast a little. But we still think that the combined impact of Government and RBNZ policies will be negative for house prices next year.”