Sunday , January 24 2021

Federal Reserve hopes to ease loan restrictions



The Reserve Bank said it is evaluating whether to ease the loan restrictions on borrowers with small deposits.

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The Reserve Bank said it is evaluating whether to ease the loan restrictions on borrowers with small deposits.

Getting a mortgage can be a little easier.

The Reserve Bank said it is evaluating whether to ease the loan restrictions on borrowers with small deposits.

At present, only 15% of new loans are available for borrowers with deposits of less than 20% and loans of 5% for investors less than 35%.

New attributes are excluded from the restriction.

Learn more:
* Reserve banks exclude issuing digital currencies … for now
* The Federal Reserve says 8% of households owe 40% of mortgage debt
* The Reserve Bank said CBL paid $ 55 million despite questioning its ability to pay.

In particular, the adoption of the investor rule was rated as having generated a stir in the Auckland real estate market.

At a UBS Australasia Conference speech in Sydney on Tuesday, Governor George Bush and Chief Financial Officer Geoff Bascand said they are pondering the future of the LVR.

"The LVR setup was introduced to address the high risk of the housing market. Regularly review the LVR settings." The question currently assessed in the Financial Stability Report is whether the same constraints are needed in the current environment. "As bank lending standards have been strengthened and credit and housing prices have stabilized steadily, we expect that policy will gradually ease if these conditions continue."

Bascand said that these constraints had done what he had intended. At the time the LVR restrictions were introduced, savings loans exceeded 20% of all loans.

He said that two-thirds of the global systemic financial crisis preceded the housing boom and bust.

High-debt households are vulnerable to high interest rates and shocks such as unemployment, which reduces their ability to repay their debts, which can lead to bankruptcies if they reduce consumption, sell houses, or suffer severe shocks. "

In the past 30 years, household debt has increased dramatically in New Zealand.

In 1988, the average household debt was about $ 16,000 and the debt ratio was 46%, about $ 35,000.

By the end of 2017, this rate had risen to 168%, while average household debt increased nearly 10% to $ 160,000, while average income decreased slightly to less than three times $ 95,000.

Bascand said LVR regulations are an important mitigation factor in the last five years, with a significant increase in mortgage-related financial system risks. "By improving the elasticity of the household balance sheet, this policy is expected to reduce the number of households that sell their homes or significantly reduce their spending in a severe recession."


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