New Zealand central bank tightens restrictions on mortgage lending
SYDNEY, September 23 (Reuters) – New Zealand’s central bank said on Thursday it would follow through on its proposal to tighten mortgage lending in a bid to control a bloated real estate market.
The Reserve Bank of New Zealand (RBNZ) from November 1 will limit the amount of loans banks can make above an 80% loan-to-value ratio (LVR) to 10% of all new loans homeowners, up from 20%, Deputy Governor Geoff Bascand said in a statement.
Bascand said house prices remain unsustainable and the risks of a housing market correction continue to rise, increasing risks to economic and financial stability.
âRestricting high-risk loans will help prevent these problems from getting worse,â Bascand said in a statement.
LVR estimates how much a bank is lending against a mortgaged property, relative to the value of that property. Borrowers with LVRs of over 80% are often seen as stretching their financial resources.
The bank lifted LVR restrictions on mortgages in April last year to boost credit and support the pandemic-stricken economy, but reinstated restrictions in March after the housing market accelerated rapidly .
New Zealand’s house price growth has been the highest among OECD countries over the past year, as investors have profited from real estate thanks to historically low interest rates and low interest rates. cheap access to finance through government stimulus spending in the event of a pandemic.
Median house prices, adjusted for seasonal variations, rose 2.5% nationwide in August from the previous month and 25.7% year-on-year, according to the New Zealand Real Estate Institute ( REINZ).
Growth in house prices has continued despite the government imposing new taxes on real estate investors.
(Reporting by Renju Jose and Praveen Menon; editing by Leslie Adler and Sam Holmes)
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