(Adds details from Reserve Bank of New Zealand)
By Lucy Craymer
WELLINGTON, May 3 (Reuters) - New Zealand's financial
system remains resilient but cash-flow pressures in households
are growing and buffers are likely to be tested, the Reserve
Bank of New Zealand (RBNZ) said on Wednesday, amid the country's
highest interest rates in 14 years.
"To date there have been limited signs of distress in banks’
lending portfolios, with only a small share of borrowers falling
behind on their payments," RBNZ Governor Adrian Orr said in a
statement alongside the central bank's twice yearly financial
stability report.
"This reflects the ongoing strength of the labour market and
that borrowers have been able to adjust their spending or use
previous savings and repayment buffers," Orr added.
The Financial Stability Report added, however, that
cash-flow pressures were growing and buffers were likely to be
tested, while a large rise in unemployment remained the biggest
risk to domestic financial stability.
"Overall, consumer and business confidence is low, pointing
to a weaker outlook for household consumption and business
investment, and reflecting the dampening effects of higher debt
servicing costs," it added.
The RBNZ has increased the official cash rate to 5.25% from
0.25% in October 2021, and mortgage rates in New Zealand have
risen sharply in the past year, putting pressure on homeowners
and businesses.
Adding to homeowners' woes, house prices have fallen more
than 16% since their peak in November 2021.
RBNZ Deputy Governor Christian Hawkesby said house prices
had continued to decline and were closer to being at sustainable
levels than had been the case in recent years.
The bank is currently looking at easing loan-to-value ratio
restrictions on home loans, reflecting the bank's assessment
that current lending activity presents less risk to financial
stability.
(Reporting by Lucy Craymer; Editing by Chris Reese and Jamie
Freed)
