House prices 'less sustainable than before', Reserve Bank considering moves to rein them in - Property News AU/NZ | propertynoise.co.nz & propertynoise.com.au

PHOTO: Adrian Orr – The Reserve Bank. Newshub/AM SHOW

The Reserve Bank is keeping an eye on the housing market, threatening to roll out stricter loan-to-value restrictions (LVR) or “additional tools” if prices keep escalating.

The bank on Wednesday released its latest financial stability report, the first since the Government told it to take house prices into account when setting monetary policy.

Issued every six months, the latest report notes “the impact of low global interest rates resulting in increased risk taking and higher asset prices” in the wake of the biggest financial shock in a century – COVID-19.

“This is an international phenomenon, with the New Zealand impact most visible in higher house prices,” the bank said.

Deputy Governor Geoff Bascand said borrowers taking advantage of low-interest rates by taking on huge debts are “more vulnerable to a rise in mortgage rates” and are exposed to a market downturn.

“We will be watching how market conditions respond to the Government’s recent policy changes. If required, we are prepared to further tighten lending conditions for housing using LVR requirements or additional tools that we are assessing.”