"DTI restrictions on residential mortgage lending, when implemented, set limits on the amount of debt borrowers can take on relative to their income," Director of Prudential Policy Kate Le Quesne said in a statement. "This supports financial stability by limiting higher-risk mortgage lending, thus reducing the likelihood of a future housing-related financial crisis." The publication of the framework does not immediately activate the restrictions and banks will be given 12 months to prepare their systems for possible implementation of the DTI restriction. The statement said the earliest these tools could be implemented would likely be March 2024. New Zealand's central bank, which must consider the impact of monetary policy on housing, has a number of macroprudential tools including loan-to-value ratios that it can implement to try to take the heat out of the housing market.
House prices in New Zealand have fallen more than 15% since
their peak in November 2021, in part because the central bank
has aggressively hiked the official cash rate. Economists expect
prices to fall further.
The central bank said late last year that only a small
number of buyers were in negative equity but that this number
will grow if prices continue to fall.
(Reporting by Lewis Jackson and Lucy Craymer; Editing by Himani
Sarkar and Jacqueline Wong)
