Plan end to loan limit, RBNZ told

Prime Minister Bill English has ruled out allowing the Reserve Bank to introduce further curbs to home lending, and has signalled it should have a plan to remove a key lending restriction already in place.

New Zealand’s central bank has come under fire recently from real estate agents saying its loan-tovalue ratio rules (LVRs) are squeezing buyers out of the housing market even as prices flatten or fall.

Real Estate Institute chief executive Bindi Norwell has called for a review of LVRs for first-home buyers, saying tightening lending criteria from cautious banks and the LVR restrictions were acting as a handbrake on the market.

However, the bank has asked for the power to impose further limits on mortgage lending in the shape of debt to income ratios (DTIs), which would restrict borrowing by tying debt levels to the income of borrowers

But yesterday English sent a clear signal to the independent bank that it should be considering how to end LVRs.

‘‘In my meetings with them I have said ... I would expect them to work through what the conditions would be, but it’s their decision,’’ English said.

‘‘If you bring something in as a temporary measure, then they should be clear about what’s involved in removing them. They were always meant to be temporary measures.’’

With the housing market flat and in certain places falling, some real estate agents were saying that because of the election the normally quiet winter period was being prolonged.

English said prices that had been rising by 15 per cent were now flat.

And he explicitly ruled out giving the bank the added tool of

"We'd like to see (LVRs) gone." Labour leader Jacinda Ardern

DTIs, which it had requested earlier in the year.

‘‘We don’t see the need for the further tools. Those are being examined. If there was a need for it then we’re open to it, but we don’t see the need at the moment ... We won’t be looking at it before the election.’’

Meanwhile, Labour leader Jacinda Ardern said she would like to see LVRs removed but would not interfere with the Reserve Bank’s right to decide.

‘‘We’d like to see them gone but we are not going to remove the independence of the governor of the Reserve Bank.’’

She said she had heard personal stories of people struggling because of LVRs.

‘We’ve never favoured them, but we’re also clear they have been introduced by the Reserve Bank because not enough had been done by the Government to end the pressure on the housing market.’’

Ardern reiterated Labour was not campaigning on a capital gains tax but believed the taxation system was not fair. It would hold a review of the taxation system.

She would not pre-empt its finding in the same way National did not pre-empt a similar 2010 review when it was campaigning in 2008.

‘‘I am maintaining our right and ability to act on its findings and do the right thing when we’re in government.’’

But whatever its findings, Labour would not put a capital gains tax on the family home.

Finance Minister Steven Joyce said Labour should come clean on its tax policy.

Labour was worried about telling voters its actual plans, he added. ‘‘They need to stop fudging and be upfront.’’