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Summary
- The RBNZ is set to make announcements on DTI restrictions and interest-only loans in late May.
- The government was expected to make an announcement in this regard in its May 5 Report.
- The government urged the RBNZ to keep in mind housing policy while making updates.
In a recent update, The Reserve Bank of New Zealand (RBNZ) will take a decision on debt-to-income ratios to cool off the housing crisis in New Zealand. It was being expected by some observers that verdict about the same would be out by May 5, when the company is to submit its interim financial stability report.
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It was, however, announced by the RBNZ that a word on this would be out later in the month. RBNZ said that it was going to be released separately from the anticipated Financial Stability report on May 5.
Government Urges the RBNZ
This came in response to the 68B direction by the government. Grant Robertson, the Finance Minister, had asked the RBNZ on 25th of February to address concerns about interest-only loans and the debt to income. With this, there was also a requisite of keeping the government policy about housing in mind while making further decisions, to ensure that the financial system is stable and secure.
Once the RBNZ has made its stance clear on the above-mentioned concerns, the government shall then decide on whether or not, the same is required to be added to the macro-prudential toolkit for the bank.
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Concerns on the matter
While Robertson has expressed that he would want the DTI restrictions to be imposed only on investors, the RBNZ governor revealed that could be difficult. Another point of concern is that RBNZ does not publish the relevant DTI investor data. The only data it publishes is about the first-time home buyers. This is precisely the section of investors that Robertson is concerned about as the high property prices have led the first-time home buyers to take increasingly risky loans as compared to the salaries they are drawing.
Also read: Where The Future Lies For NZ House Prices
The growth in housing prices as well as COVID-19-related factors have made first-time homeowners more and more reluctant towards investing right now. It was witnessed statistically that a major section of the people purchasing properties currently were the ones who already owned more than 5 homes each. The government, keen to fight this growing concern, has recently announced the investment of NZ$4M in the housing sector to ensure that things become easier for first-time buyers and they do not simply invest with the intention of flipping houses.
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