1.When? The idea was been floated by the RBNZ, but is only an idea at this stage. Looking through the Financial Stability report released this month, the RBNZ mentioned that “Increasing housing supply is key and further efforts on a range of fronts should be considered to address the supply and demand imbalance” To put something like in place the RBNZ will have to get the green light from the Government. They would tend to then open the idea up to get input from related parties such as banks.
I think all this would take 12 months if the RBNZ started the ball rolling today,
2. What will happen to house prices? The RBNZ may come up with the scheme which is similar to the U.K; loan to be 4.5 times the annual income for most borrowers (15% of new mortgages), the U.K introduced this around June 2014.
Reports last month suggest house prices in the U.K are rising at their fasted pace in 12 years.
http://www.ibtimes.co.uk/uk-housing-house-prices-uk-cities-growing-fastest-pace-since-2004-1556072
https://www.theguardian.com/business/2016/apr/01/average-uk-house-price-tops-pounds-200000
3. Who will be affected? The Loan to income ratio in the U.K only applies to owner occupier. Investor loans have other restrictions like rent should be 125% of monthly interest cost.
The whole of Debt to income ratio is a step towards a safer market. The RBNZ is simply trying to create some maneuvering room should the market experience a sudden correction; whilst keeping interest rates low for the rest of the economy.
This article has been written by Hamish Patel, mortgage broker with mortgagesonline.co.nz. Ph: 09 625 4693, Mobile: 021 625 693, hamish@monline.co.nz
