Housing market has turned: RBNZ

House hunters appear set to escape proposed new lending rules for some time, with the Reserve Bank saying debtto-income (DTI) ratios are off the table for now at least.

While this may sound like good news, it is based on the view that the housing market may be losing momentum.

Reserve Bank governor Graeme Wheeler has formally requested that DTIS be added to the tools available to it to restrict residential lending, as part of its memorandum of understanding with Finance Minister Bill English.

More than six months after Wheeler first raised the issue, English responded with what appear to be fundamental questions about the purpose of the restrictions, leading to claims he may be stalling.

The rules would, if imposed, limit how much households could borrow to a proportion of their income.

However, this week Wheeler pointed to evidence that the housing market may be turning, and so even if the rules were available, they would not be introduced.

‘‘We’re seeing the housing market come off to some degree in terms of house price inflation. There’s a number of reasons for that, it might be linked to the LVRS [loan-to-value ratios] themselves. It could also be linked to the fact that bank credit criteria has tightened up.’’

Wheeler said he understood banks had stopped lending to buyers relying on overseas income, and had tightened the rules on developers, in particular on apartments. At the same time bank funding costs were increasing as lending growth exceeded deposits, forcing them to go offshore for money. –Fairfax NZ