Should the RBA follow the Reserve Bank of New Zealand and introduce limits on bank lending as a property cooling measure?
Concerns at the rate of New Zealand house price growth - and the potential risks that posed to the financial system - has prompted the NZ Reserve Bank to impose restrictions on the loan-to-value ratio (LVR) for housing mortgage loans within lending banks from October 1.
The banks will need to restrict new lending with LVRs of more than 80% to no more than 10% of the dollar value of their new housing lending flows.House prices increased by 16% and 10% respectively in Auckland and Christchurch over the past year (three-month moving average to July 2013 over the same period in 2012).
They increased by 4% over the rest of New Zealand overall, with considerable variability among regions.
But here in Australia the growth isn't at these levels, and doesn't seem set to get any cap on loan-to-value ratios (LVRs) under the RBA governorship of Glenn Stevens.
Last year Dr Luci Ellis, head of the RBA’s Financial Stability Department, stressed borrowers needed to provide some deposit when they buy a home.
Dr Ellis noted a cap would have little impact on buyers trading up, but certainly squeeze first-home buyers out of the market.
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