Investing.com - The Reserve Bank of New Zealand on Wednesday announced changes to its macro-prudential policy targeting the Auckland area to deal with the increase in financial stability risks from stretched housing prices.
The RBNZ will issue a consultation paper in late May to outline these proposals in further detail and seek feedback, and plans to implement the rules beginning Oct. 1.
In the half-yearly Financial Stability Report issued Wednesday the RBNZ said the changes "involve a new restriction on loans to property investors in the Auckland region with a (loan-to-value ratio) of greater than 70% (i.e. to set a speed limit on such loans at close to zero).
For all residential lending outside the Auckland region, the Bank is proposing to increase the existing speed limit for loans with an LVR of greater than 80% from 10% to 15%, to recognize relatively subdued housing market conditions outside Auckland."
In the report, the RBNZ said the financial system is sound and operating effectively but faces significant risks.
It detailed three main systemic risks facing the New Zealand financial system: The rise in Auckland's median house price which is 60% above its 2008 level, risks from the dairy sector which is experiencing a sharp fall in incomes due to lower international prices and very easy global financial conditions which is encouraging investors into riskier assets and could potential disrupt the cost and availability of funding in New Zealand once the benign conditions unwind.
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Reserve Bank of New Zealand plans tighter house loan rules in Auckland
Published 05/12/2015, 06:14 PM
Updated 05/12/2015, 06:17 PM
Reserve Bank of New Zealand plans tighter house loan rules in Auckland
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