Reserve Bank of New Zealand plans to tighten lending conditions in response to the growing property market risk in Auckland.
“Prices in the Auckland region have become very stretched, increasing the risk of financial instability from a sharp correction in prices,” RBNZ Governor Graeme Wheeler said in the Financial Stability Report released Wednesday.
According to the proposed changes, residential property investors in the Auckland using bank loans should have a deposit of at least 30 percent. The proposed policy would come into force from October 1.
The bank increased the existing speed limit for high loan-to-value ratio (LVR) borrowing outside of Auckland to 15 percent from 10 percent, to reflect the more subdued housing market conditions outside of Auckland.
Further, it retained the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.
Deputy Governor Grant Spencer said that the bank will issue a consultation paper in late May, providing further details and seeking feedback on the new LVR proposals.
The material has been provided by InstaForex Company – www.instaforex.com