NZ’s financial stability under threat as lending skyrockets – economist

An expert believes loan-to-value restrictions (LVR) need to be toughened as mortgage lending hits a record high.

The New Zealand housing market is skyrocketing, with a record $7.3 billion borrowed last month.

Kiwibank chief economist Jarrod Kerr said on Wednesday record-low mortgage rates, as well as LVR restrictions, had helped first home buyers.

But Milford Asset Management senior analyst Frances Sweetman told The AM Show those restrictions are urgently needed again.

“There’s been a big jump in that high LVR, low deposit lending,” she said. “That is a problem for financial stability further down the line.

“When the RBNZ removed its high LVR restrictions in April – it thought that banks would want to take less risk – but it doesn’t seem to be the case.”

Sweetman expects interest rates will remain low but said other policies are needed to ensure longer-term financial stability.