Debt-to-income ratios to slow housing market

New debt-to-income (DTI) ratios are unlikely to stop first-home buyers from entering the property market any time soon, commentators say. The Reserve Bank indicated this week that the rules, which limit howmuch people can borrow to a certain multiple of their annual income, were at least a year away. The restrictions are used in other markets around the world where borrowers must have a loan no bigger than 4.5 times their income. The Reserve Bank has previously suggested it could cap the amount borrowers could spend on a home to seven times their gross incomes. Some banks already impose their own limits. Its most recent financial stability report showed about 8% of first-home buyers were borrowing with a DTI over six and loan-to-value ratio (LVR) over 80%, and more than 20% had a DTI over six and LVR over 70%. Deputy governor Christian Hawkesby said the central bank planned to have a framework for DTI controls in place by late this year, ‘‘so that restrictions could be introduced by mid-2023 if required’’. The Reserve Bank had previously said it expected banks to be ready to implement regulated DTI limits by no later than at the end of this year. The bank noted that borrowers’ DTI ratios had increased as falling interest rates made it cheaper to service debt, which could put some in a risky situation. ‘‘This is potentially leading to an accumulation of longer-term servicing vulnerabilities.’’ ANZ chief economist Sharon Zollner said, given where house prices were expected to be in a year, it was unlikely to be an environment in which people were rushing to take on risky lending anyway and the immediate impact of the newrules would be muted.