DTIs not in the near future - economists
The Reserve Bank issued its latest Financial Stability report today and one of its major focus points was the increase of lending at high debt-to-income (DTI) ratios.
Improved bank resilience to house price falls could be undermined if the increase in high DTI lending is sustained, the bank said.
“High-DTI loans are at a higher risk of default in the event of an economic downturn, so an increasing concentration of this lending is of concern.”
According to the report, around a third of new mortgage lending is currently conducted at a DTI ratio of over 6.
The bank said that if house prices continue to increase at the current rate, further pressure on housing affordability is likely to cause a higher share of lending at these stretched DTI ratios.
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