LVR rules could be loosened this month: Westpac

When the Reserve Bank introduced its restrictions on loans to borrowers with less than 20% equity, it wanted to reduce that lending to 15% of total new mortgage lending, or 10% without exempt loans, such as Welcome Home Loans and mortgages for new builds.

But banks have pulled back a lot more heavily and new low-equity lending has been hovering at around just 5% of new loans.

Westpac’s economists said the impact of the rules had been more modest than was intended in terms of slowing credit growth and the housing market. But they said there were signs of the LVR rules' success in the fact that there had not yet been a spillover of the stronger economy into an upsurge in debt-fuelled spending, as happened in the mid 2000s.

"Importantly, households have stopped leveraging up, despite stronger economic growth and much stronger confidence. Back in early 2013 there was a rising concern that household debt was once again growing faster than incomes. But on the RBNZ’s latest estimates, the ratio of household debt to disposable income stabilised in the second half of 2013."