LVR restrictions to be reviewed

The Reserve Bank indicated today that they will be reviewing the criteria for relaxing the loan to value (LVR) restrictions.

At the press conference following today’s Monetary Policy Statement, RBNZ Governor Grant Spencer said this would be discussed at the Financial Stability Review on November 29.

When asked whether the housing market had moderated enough for the LVR to be relaxed, Spencer reiterated that this would be assessed at the review stage.

He also said that the bank had been in consultation around the possible introduction of a debt to income (DTI) policy and how they would make it work.

“While it makes sense to have such a macroprudential policy in the toolkit, this issue of [whether to introduce this] will be addressed in a review that will be undertaken in the course of talks with Treasury next year,” he said.

The LVR restrictions were always meant to be a temporary measure, Spencer said, but any changes to the policy would be introduced incrementally. He indicated that these changes may happen over the next few years.

The RBNZ said that the government’s ban on foreign investment in the property market, along with the extension of the bright line test to five years and the abolishment of negative gearing, will moderate investor demand and help to further soften the housing market.