Regulatory Alerts2022-05-17
Regulatory Impact Assessment: Reinstating Loan-to-Value Ratio Restrictions
The Reserve Bank of New Zealand is reinstating Loan-to-Value Ratio restrictions starting 1 March 2021 to mitigate financial stability risks arising from rapid housing market acceleration and high borrower leverage. The policy imposes a 20% speed limit on owner-occupier lending above 80% LVR and a 5% limit on investor lending above 70% LVR, with stricter investor thresholds of 60% LVR taking effect on 1 May 2021. This decision aims to strengthen bank balance sheets and dampen excessive credit growth, outweighing short-term economic costs with significant medium-term benefits to financial resilience and economic welfare.
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