Bank may alter lending rules for house investors
PROPERTY investors may be the subject of tougher Reserve Bank controls as speculation mounts that the central bank will make an important announcement tomorrow.
Reserve Bank governor Graeme Wheeler will make his annual address to the Canterbury Employers Chamber of Commerce, with a media lock-up beforehand.
A central bank spokesman said a lock-up was not unusual before the Canterbury speech, but he acknowledged that it was usually ‘‘the scene-setter for the year’’.
Westpac economist Dominick Stephens said it was impossible to know what, if any, announcement would be made.
But one of the stronger possibilities was the introduction of new rules for banks lending to investors who own several houses. The rules were meant to be introduced in June last year but were delayed.
Under these rules owners of multiple properties would be treated like small-business owners, forcing banks to hold more capital as a buffer to cover their lending.
For property investors, it could mean higher equity requirements next time they bought a house.
However, competition among banks to lend money was so strong that the cost of commercial lending might not get passed on, Loan Market mortgage adviser Bruce Patten said.
The banks had a lot of money to lend, and lending restrictions on first-home owners had been crimped, ‘‘so they’ll be trying to find ways to redistribute their money’’.
Patten said some questioned the need for curbs on landlords because most only owned two houses.
‘‘I know the banks are doing a lot of lobbying with the Reserve Bank about whether that’s a sensible thing because it affects such a very small part of the market.’’
However, with interest rates so low, the Reserve Bank would be watching the Auckland housing market revival carefully.
‘‘There is a massive amount of activity out there at the moment.’’
Another possibility surrounding tomorrow’s speech was a clampdown on the ratio of income to mortgage lending, similar to Britain, Patten said.
Stephens would be ‘‘really surprised’’ if the bank introduced a new policy on mortgage lending after saying in early December that ‘‘macroprudential tightening’’ was not being considered.
He thought it more likely the Reserve Bank would tighten an existing policy, such as its LVR (loan-to-value ratio) restrictions on low-deposit mortgages, or introduce a permanent, already flagged policy such as the ‘‘landlord’’ provisions.