Looks like moves are afoot to restrict lending somewhat especially to those with small deposits.
Using logic we come with the following answer:.
If lending is restricted to those with bigger deposits then the “poor” will be disadvantaged.
That in turn means they will have to remaining renting much longer than at present and may never accumulate enough to buy a home of their own.
The 1930’s poem by Billy Bennett has these verses in it which sums the situation up perfectly:
She was poor, but she was honest
Though she came from ‘umble stock
And an honest heart was beating
Underneath her tattered frock
It’s the same the whole world over
It’s the poor what gets the blame
It’s the rich what gets the pleasure
Ain’t it all a bloomin’ shame?
Read the whole poem here:
For investors the signs are very clear. Stock up now with long term holds suitable for renting because if and when the RB restricts lending, the pressure on rents will certainly go on. Ensure you buy good rentals, and not trashy ones in slum suburbs. Rentals that you can always be proud of, for use by decent folk who will respect the property and you. Being a slum landlord is nothing to be proud of. Remember: Good rentals will deliver good returns both in cash and capital growth for many years into the future.
Reserve Bank wants to increase the amount of capital banks must set aside to cover potential losses from high loan to valuation ratio home loans
March 26, 2013 -
By Gareth Vaughan
The Reserve Bank says it wants to increase the amount of capital the country’s big four banks must set aside to cover potential losses from high loan to valuation ratio (LVR) home loans. Such a move could, in theory at least, make such lending more expensive for the banks.
The central bank today said it’s reviewing the housing loan capital adequacy requirements currently in place for banks, and issued a consultation paper entitled Review of bank capital adequacy requirements for housing loans (stage one).
In the paper the Reserve Bank notes average housing risk weights for the big four banks are in the range of 25% to 31% compared with an average of about 38% for other banks including Kiwibank. However, the potential increases outlined in the paper would still see risk weights on housing loans lower than the 50% they were for all home loans up until 2008.
Housing loan requirements determine the amount of capital banks must set aside to cover potential losses from lending to the housing sector. The current rules were set in early 2008 as part of the Reserve Bank’s implementation of the international Basel II capital adequacy regime, replacing Basel I.
Read the rest here: