[ad_1]
Adds details
WELLINGTON, February 9 (Reuters) – New Zealand’s central bank continues Ttightened investor mortgage lending on Tuesday, warning that an overheated property market could result in a sharp correction that could negatively affect the country’s financial stability.
The Reserve Bank of New Zealand lifted mortgage lending restrictions (LVR) in April last year to stimulate the flow of credit and stimulate the economy hit by the coronavirus pandemic.
However, it decided to reintroduce the March restrictions after the property market experienced a rapid acceleration, setting new records for the national median price and resuming new mortgage loans at a rapid pace.
“We are now concerned about the risk that a sharp correction in the housing market poses to financial stability,” Deputy Governor Geoff Bascand said in a statement.
“There is evidence of a speculative dynamic where many buyers are heavily leveraged,” he said.
The RBNZ confirmed that from March, LVR restrictions would return to pre-COVID-19 levels, meaning banks could only extend up to 20% of their residential mortgage loans to owner-occupiers with deposits of less than 20% counting.
As for investors, no more than 5% of these loans can go to those who deposit less than 30%. From May 1st, the payment obligation for investors is to be increased to 40%.
The restrictions of the LVR do not apply to new residential construction.
Bascand said mortgage lenders are expected to respect the new restrictions immediately with any new loan approvals.
In his budgetary speech on Tuesday, the finance minister promised “bold action” on housing in the face of mounting pressure on the government to keep the housing crisis under control.
The RBNZ rejected a government call last year to include house prices in its monetary policy mandate, saying it would have negative tradeoffs.
(Reporting by Praveen Menon Editing by Chris Reese and Sonya Hepinstall)
(([email protected]; +6448028163; Reuters Messaging: [email protected]; Twitter: https://twitter.com/Journopraveen))
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
[ad_2]
