RBNZ expects slowdown in high debt-to-income lending

PHOTO: RBNZ. FILE

The Reserve Bank expects to have further limits on risky property lending ready to go next year, but has hinted they may not be needed.

Photo: RNZ / Nate McKinnon

The central bank has been consulting on proposed debt-to-income ratios (DTIs) and setting minimum interest rate tests to see if borrowers can afford rising rates.

RBNZ deputy governor Christian Hawkesby said research backed the view that property investors would be the most affected and first home buyers the least by such controls.

“Our modelling indicates that first-home buyers would be the least impacted by a DTI restriction, with investors impacted the most as they tend to borrow at higher DTIs than other groups on average.”

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DTIs are a measure of debt serviceability, requiring lending to be matched to the income of the borrower. For example if the DTI was set at five, a person with an annual income of $100,000 would be limited to $500,000 of borrowing for a property.