Loan-to-income restrictions favoured
The NZ Institute of Economic Research says an idea floated by the Bank of England to manage financial stability would be better than the approach taken by the Reserve Bank in New Zealand.
"We like the Bank of England’s proposed restrictions on high loan-to-income (LTI) mortgages better than New Zealand’s LVR restrictions.” NZIER principal economist Kirdan Lees says.
“Restrictions on high loan to income mortgages directly address the risk that the Bank of England is worried about: that very high household debt could cause a sharp economic correction in the future.”
High LVR mortgages only tell you that house purchases are made without much collateral. But LVR restrictions do not take into account households’ long-term ability to service debt.
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