Aucklanders viewing properties elsewhere
27th Jun
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Two years ago it was first time buyers and now it is landlords who the Reserve Bank will target with lending restrictions.
The Reserve Bank of New Zealand recently announced it had opened up consultations to examine new lending rules for property investors.
In a statement the RB said it was looking at a "new asset class treatment for mortgage loans to residential property investors." The initial aim was to determine how best to define a property investment loan.
Fairfax News reported proposed changes were to make sure that banks hold enough capital for the risks involved in investment property loans and would bring New Zealand into line with international lending rules, the Reserve Bank said.
Reserve Bank Head of Prudential Supervision Toby Fiennes said: "International evidence suggests that default rates and loss rates experienced during sharp housing market downturns tend to be higher for residential property investment loans than for loans to owner occupiers," Fairfax News reported.
"The proposed rule amendment is designed to ensure that banks hold adequate capital for the risks that they face from investment property lending," he said.
The New Zealand Herald said the RB had previously consulted on a loans to borrowers with five or more residential properties classified as loans to residential property investors.
"Partly as a result of submissions received, the bank has reconsidered the definition, and is now consulting on three possible alternative ways to define loans to residential property investors," Fiennes said.
At the end of 2013 the Reserve Bank imposed speed limits on low deposit loans.
The news came a no surprise to market commentators with the New Zealand Institute of Economic Research telling Fairfax News it expected the Reserve Bank to unleash more controls on bank lending, known as "macro-prudential" tools, to dampen a superheated Auckland housing market.
The bank said it was examining three alternative ways to define loans to residential property investors:
- If the mortgaged property is not owner-occupied; or
- If servicing of the mortgage loan is primarily reliant on rental income; or
- If servicing of the mortgage loan is at all reliant on rental income.