The Reserve Bank has been pushing to be allowed to include DTIs in its macro-prudential toolkit for some time and even launched a consultation on the prospect in June.
But now the moderation of the housing market along with the change in government seems to have halted the bank’s DTI drive.
At the Financial Stability Report press conference this morning, Reserve Bank Acting Governor Grant Spencer confirmed that a decision on the adoption of DTIs has been put on hold.
He says the Reserve Bank has agreed with the government to postpone further consultation on the DTIs for the review that they will be conducting with Treasury next year.
“We still think that DTIs, or some sort of debt serviceability instrument, is a relevant tool to have in the macro-prudential toolkit.
“But we don’t think it is appropriate to be applied to the current housing market as it has moderated substantially. “
That means the decision on whether to adopt such a tool has been deferred for some time and the Reserve Bank is comfortable with the postponement
Spencer says the bank was never in a position to say that it would be necessary to adopt them in the near term and now that the market has cooled down the time is not right for them.
“But the market is cyclical and a DTI type instrument might be appropriate to enforce at some time in another cycle.”
The announcement was greeted with enthusiasm by many.
Loan Market’s Bruce Patten says it is great that the DTIs are off the table for now because “no-one was ever really comfortable that they were the right thing to do”.
Property Institute chief executive Ashley Church says he is delighted the DTIs have been put to rest for the foreseeable future
“The DTIs were a silly idea from start to finish and had the potential to have massive negative consequences on the market.’
There has long been staunch opposition to the prospect of DTIs.
Last week the Reserve Bank released the submissions it received on its public consultation on DTIs and the majority come down firmly against the proposal.
Politicians from across the spectrum have also publicly opposed the introduction of DTIs.
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