RBNZ adds another tool to rein world’s hottest housing market

In order to rein in the country’s rampant housing market, the Reserve Bank of New Zealand (RBNZ) has added a debt-to-income instrument to its toolkit, the central bank Governor Adrian Orr said in a statement Wednesday in Wellington. 

Key quotes

“We consider that a DTI limit would be a complementary tool to mortgage Loan-to-Value Ratio restrictions as they address different dimensions of housing-related risk; DTIs reduce the likelihood of mortgage defaults while LVRs largely reduce losses to banks if borrowers default.”

“Although we do not have a remit to target house prices directly, our financial policy tools can help to ensure prices do not deviate too far from sustainable levels.”

“The minister agreed to add debt serviceability restrictions to the RBNZ’s toolkit on the condition that any implementation is designed to avoid impact, as much as possible, to first-home buyers.”

“The bank’s analysis had demonstrated that any such restrictions “would impact investors most powerfully.”