WELLINGTON, Sept. 23 (Xinhua) -- The Reserve Bank of New Zealand (RBNZ) will proceed with its proposal to tighten Loan-to-Value Ratio (LVR) restrictions on lending to owner-occupiers to reduce risky mortgage lending.
From Nov. 1, the RBNZ will be restricting the amount of lending banks can do above an LVR of 80 percent to 10 percent of all new loans to owner-occupiers, down from 20 percent at present, RBNZ's Deputy Governor and General Manager for Financial Stability Geoff Bascand said in a statement on Thursday.
"We launched our consultation earlier this month after observing that despite previous adjustments to LVR restrictions, house prices remained unsustainable and the risks of a housing market correction had continued to rise, increasing risks to economic and financial stability," Bascand said, adding restricting high-risk lending will help prevent these problems from getting worse.
Submissions from industry representatives were largely supportive of the proposal, with respondents recognizing the need for further tightening in order to help control house price inflation and mitigate potential risks to financial stability, he said.
Feedback from members of the public was mixed, with some submissions supporting the proposals, and others questioning the need for further restrictions or arguing for other policies to protect the financial system, according to the RBNZ.
Given the disruptions from heightened COVID-19 alert levels to customers and banks in managing or completing purchases associated with existing pre-approvals, the RBNZ is delaying the implementation start date to Nov. 1, Bascand said.