Reserve Bank Threatens


How is this going to work- by government decree?

By cooperation from the banks?

Unless it’s by law or decree it will be hard to police.

And who will it effect?

First home buyers and maybe a few bunnies who have been to a “get rich quick seminar” and believe they will be millionaires by Monday.

Unless I am much mistaken it will be a lot of “jaw boning” and the banks will nod in agreement but carry on much as before.

If it does work the effect on rents will be great as many aspiring home owners will be forced to rent for even longer, trying to save a bigger deposit. Of course rents will rise under this effect. Rents have been kept subdued by the number of people buying investment homes and supplying the market. If this dries up the inflationary effect on rents will be even greater.

Seems to me that first home buyers should continue to get low deposit homes and maybe the investors need the larger deposits.

Alternatively interest rates could be a small percentage higher for investment properties as compared to owner occupied. Again this would feed into rents which is a good thing or a bad thing depending which side of the fence your are on.

There’s an ironic twist to all this.  At the present time the Building & Housing Dept is desperately trying to get private landlords to supply more rentals. How will higher LVR’s help this situation? The demand from renters will only increase, while the supply shrinks. Brilliant!

Reserve Bank indicates curbs on low deposits

JAMES WEIR

31/05/2013

The Reserve Bank is raising the red flag that it could bring in limits on low- deposit bank loans, curbing home lending overall but helping it keep interest rates lower for longer.

In a speech to the Auckland Institute of Directors, Reserve Bank governor Graeme Wheeler said the bank was now working on the “operational details” for its new macro-prudential tools.

Controls on high “loan-to-value ratio” LVR lending, with deposits of less than 20 per cent, are expected to be the first cab off the rank.

Meanwhile, Wheeler said the exchange rate remained significantly overvalued, but also admitted that the kiwi could remain strong for some time because of the favourable domestic economic outlook.

Westpac Bank economists said the speech showed the Reserve Bank was keen to try out the new tools “and may well do so, before it makes any changes to the official cash rate”.

“At the margin, the upshot is that the OCR could remain on hold for longer,” Westpac said.

But the bank’s economists remained sceptical about whether the tools would have any significant impact on the housing market. It was likely that they would be used to see how they affected inflation, but eventually the Reserve Bank would “bite the bullet and raise interest rates”, Westpac said.

Link

http://www.stuff.co.nz/business/money/8739049/Reserve-Bank-indicates-curbs-on-low-deposits

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