RBNZ introducing macroprudential tools 'soon'
The report is the latest indication of the Reserve Bank’s intentions for macroprudential tools to target asset price bubbles and enhance stability. Tools being considered include loan-to-value restrictions, counter-cyclical capital buffers and sectoral requirements.
Governor Graeme Wheeler said house prices increases were a risk to financial stability in New Zealand, and some borrowers were leaving themselves exposed to risk by taking out large loans with minimal deposits.
Banks were more willing to lend to customers with less equity, he said, leaving borrowers with higher debt levels relative to both their income and assets. That would leave them vulnerable to either a drop in incomes or a rise in interest rates.
“Given that interest rates are at historical lows and will likely rise in the future, lenders should ensure borrowers will be able to service loans even if interest rates rise substantially.”
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