Reserve Bank gets green light to tighten lending rules for housing (hopefully without impeding first-home owners)

The Reserve Bank has been given the government’s go-ahead to tighten mortgage lending rules to try to take some heat out of the housing market.

An updated Memorandum of Understanding between the Minister of Finance and the Reserve Bank will enable it to implement its proposal to reduce the amount of low-deposit bank lending banks for mortgages.

Announcing the updated MOU, Finance Minister Grant Robertson today said the central bank has proposed reducing the amount of lending banks can do above a high Loan-to-Value Ratio (LVR) of 80 per cent.  This lending will be lowered from 20 per cent to 10 per cent of all new loans.

Consultation will start with banks later this month, with a view to introduce this from 1 October, 2021.

The central bank also intends to start consultations in October on implementing Debt to Income (DTI) restrictions and/or interest rate floors.

Under changes introduced earlier this year, the Reserve Bank was required to have regard for the Government’s housing policy to support more sustainable prices.

Dampening investor demand for existing housing stock, to improve affordability for first-home buyers, was among the changes.

The further wording in the MOU stems from government concerns to ensure lending for new home owners was not impeded by the measures taken to tighten lending rules.

The new requirement states:

In the design and implementation of a debt serviceability restriction, the Reserve Bank will need to have regard to avoiding negative impacts, as much as possible, on first home buyers, to the extent consistent with the Bank’s purposes and functions under Part 5 of the Act.”

Robertson said he believed this agreed wording will set clear public expectations while maintaining the operational independence of the Reserve Bank.

“It is still up to the Reserve Bank how it chooses to introduce any restrictions, having had regard to this condition.”

Any decision to introduce DTIs would happen only after a full public consultation and Regulatory Impact Assessment, which would take a minimum of three months, Robertson insisted.

“The Government has already put in place a number of measures to cool the housing market to make house prices more sustainable and tilt the balance in favour of first home buyers, including extending the bright-line test and removal of interest deductibility.

“Theses initiatives will make a real difference. However, there is no silver bullet to housing affordability and monetary and fiscal policy need to work together to achieve a sustainable housing market,” Grant Robertson said.

Latest from the Beehive

Obituary

Poroporoaki: Dr Hōhepa (Joe) Mason

As Parliament resumes today, Minister for Māori Development Willie Jackson acknowledges the recent passing of a great orator and a dedicated servant to preserving mātauranga Māori, Dr Hōhepa (Joe) Mason QSO.

Monetary policy

Finance Minister and RBNZ Governor agree to update MOU on macro-prudential policy

Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have updated the Memorandum of Understanding (MoU) on macro-prudential policy to further protect the financial system and support the Government’s housing objectives.

 Further wording in the MOU states:

In the design and implementation of a debt serviceability restriction, the Reserve Bank will need to have regard to avoiding negative impacts, as much as possible, on first home buyers, to the extent consistent with the Bank’s purposes and functions under Part 5 of the Act.”

The Reserve Bank has proposed reducing the amount of lending banks can do above a high Loan-to-Value Ratio (LVR) of 80 percent, from 20 percent to 10 percent of all new loans. Consultation will start with banks later this month, with a view to introduce this from 1 October, 2021.

The Bank also intends to start consultations in October on implementing Debt to Income (DTI) restrictions and/or interest rate floors.

Flood relief

Government commits further assistance for drought and flood-affected rural communities

Farmers and growers affected by this year’s drought or floods in Marlborough, Tasman, West Coat, Canterbury, Otago and the Chatham Islands will have access to Rural Assistance Payments (RAPs) from today, Social Development and Employment Minister Carmel Sepuloni has announced.

The drought in Marlborough, Canterbury, Otago and the Chatham Islands was classified as a large-scale adverse event by the Minister of Agriculture on March 12 2021. The flooding in Canterbury was classified as a medium-scale adverse event on 1 June 2021; while the flooding in the West Coast, Marlborough and Nelson was classified as a medium-scale adverse event on 18 July 2021.

The Ministry of Social Development works with the Ministry for Primary Industries, the National Emergency Management Agency (NEMA), regional councils, the Rural Support Trust and other agencies to monitor conditions and review the support needed.

Languages

Cook Islands youth lead Language Week

The Cook Islands Language Week theme for 2021 highlights the vital role language plays in maintaining young people’s links to their Pacific home, said Minister for Pacific Peoples Aupito William Sio.

The 2018 census revealed that of the 80,000 Cook Islanders living in New Zealand, 80 percent were born in New Zealand.

Cook Islands Language Week runs from Sunday 1 August to Saturday 7 August 2021.

Apology 

Government offers formal apology for Dawn Raids

Prime Minister Jacinda Ardern has formally apologised to Pacific communities impacted by the Dawn Raids in the 1970s.

Between 1974 and 1976, implementation of a series of rigorous immigration policies resulted in targeted raids on the homes of Pacific families. The raids to find, convict, and deport overstayers often took place very early in the morning or late at night.

The harsh verbal and physical treatment of the families gave rise to the term the ‘Dawn Raids’.

“Today I offered, on behalf of the Government, a formal and unreserved apology to Pacific communities for the discriminatory implementation of immigration laws that led to the Dawn Raids,” Jacinda Ardern said.

The Minister for Pacific Peoples, Aupito William Sio says looking back it’s clear that the immigration laws were discriminatory.

“Pacific peoples, Māori and other ethnic communities were specifically targeted and racially profiled, which was wrong and should have never happened,” Aupito William Sio said.

“In 1986 the Race Relations Conciliator found that between 1985 and 1986, while Pacific peoples comprised roughly a third overstayers, they represented 86 per cent of all prosecutions for overstaying. Racially targeting Pacific communities created a decades long false impression of the status of Pacific New Zealanders.

“During the same period overstayers from the United States and Great Britain who also comprised roughly a third of overstayers made up only five per cent of prosecutions,” Aupito William Sio said.

The Government has as part of the formal apology, committed to honour Pacific ways of seeking reconciliation. It will be providing:

  • $2.1 million in academic and vocational scholarships to be available to Pacific communities.
  • $1 million in Manaaki New Zealand Short Term Scholarship Training Courses for delegates from Samoa, Tonga, Tuvalu, and Fiji.
  • It will also be providing resources that are available to schools and kura who choose to teach the history of the Dawn Raids, which would include histories of those directly affected.
  • The Ministry for Culture and Heritage and Ministry for Pacific Peoples will provide support to enable Pacific artists and/or historians to work with communities to develop a comprehensive historical record of account of the Dawn Raids period as an additional goodwill gesture of reconciliation.

Speech to Dawn Raids Apology

This is the speech delivered by the PM when she delivered the apology for the Dawn Raids.

Cycle tracks

Bridging the gap – last piece of Northcote Safe Cycle Route now complete

The opening of two bridges over Auckland’s Northern Motorway is the last link of a cycling and walking route which provides a safe, active alternative for students and commuters, Transport Minister Michael Wood said today.

Wood cut the ribbon for the completion of the Northcote Safe Cycle Route, at Takapuna Normal Intermediate School, one of the key destinations in the area which will benefit from the latest addition to the expanding city-wide cycling and walking network.

The Northcote Safe Cycle Route is a great addition to Auckland’s growing walking and cycling network

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