Rules around home loans in New Zealand may be about to change, possibly dampening prospects of another boom that would put ownership further beyond reach for those trying to enter the property market.
Changes are expected mid-year to the Debt-to-Income rules that govern how much and in what circumstances a lender can issue a mortgage to a buyer.
The Reserve Bank of New Zealand has flagged that this move promises to have a significant impact on the property market.
Industry response so far has been largely positive, with the most common observation that lending restrictions would help dampen the sort of market exuberance that was seen during Covid, creating a boom-bust moment.
CoreLogic chief economist Kelvin Davidson believes the DTI changes may constrain annual value growth to between 3% and 4%.
Recent history makes a strong case for these changes.
RBNZ says 10% of lending to upgraders and 7% to first-home buyers exceeds the current six-times income limit.
In the 2020-21 boom, 36% of loans to upgraders and 28% for first-home buyers exceeded the limits.
Among proposed changes is restricting banks to lending at a maximum of six times before-tax household income for owner-occupiers and seven times for investors.
Banks have a limited right to waive these restrictions for customers, if they choose. However, no more than 20% of their new lending can be outside these new rules.
Lenders will be able to increase the percentage of new loans with a deposit of less than 20% of property value, from 15% to 20% of borrowers.
Minimum investor deposits will be reduced to 30% from 35%.