Govt plan helps tip LVR scale

New Zealand’s top central banker has warned buyers that a move to ease lending rules is not an attempt to breathe life into the cooling housing market.

Yesterday the Reserve Bank announced a surprise move to lift the amount of lending banks can do to borrowers with deposits of less than 20 per cent from January 1 next year.

This will increase from 10 per cent of the total loans on residential property to 15 per cent.

While pressure has been exerted on the central bank to relax the rules from politicians and the property sector, amid signs of a cooling market, it was not expected to make changes until at least the middle of 2018.

But Reserve Bank acting governor Grant Spencer said the change was not designed to breathe life into the market.

Asked if he was sending a signal that he was backing firsttime buyers, Spencer warned that the market was expected to be flat.

‘‘We’d say [to buyers], continue to be cautious. The market has moderated. We expect it to continue to moderate,’’ Spencer told reporters at a press conference in Wellington. ‘‘This is not an attempt to bolster the housing market, or to move it up.’’

While the housing market appears to have been softening for a year, the Reserve Bank has repeatedly warned of the risk of a resurgence.

Spencer said new Government’s housing policies, which include a ban on foreign buyers, a major state building programme and an extension of the ‘‘brightline’’ test to tax property speculation, would have a ‘‘dampening effect’’ on the market.

Head of financial stability Geoff Bascand said a number of factors led to the decision to relax the rules. Prices had stabilised and the speed of credit growth had slowed.

In recent weeks a survey showed banks expected credit conditions to tighten over the next six months, which he described as a ‘‘surprise’’.

On top of that ‘‘the Government’s [housing] policy intentions added to that sense of confidence that we don’t think there’s going to be this sort of bounce back’’ of house prices, Bascand said.

Finance Minister Grant Robertson seized on the comments.

‘‘For a long time the Reserve Bank has been looking for a friend in Government in addressing the housing crisis. We’re taking steps to do that,’’ Robertson said.

He also added caution for those looking to buy.

‘‘It’s still a good investment in terms of providing security of somewhere to live. [But] clearly we are still in a situation where there is an imbalance between income and house prices … People need to bear that in mind.’’

Westpac senior economist Michael Gordon said the bank was ‘‘surprised’’ the bank had moved so quickly, and it could breathe life into the housing market.

‘‘[W]e see a risk of a further near-term bounce, as buyers look to get in ahead of the foreign buyer restrictions and the extension of the bright-line capital gain test from two to five years.’’