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LVR "speed limits" welcome and necessary

LVR "speed limits" welcome and necessary

The Reserve Bank of New Zealand (RBNZ) has released the details on restrictions to high loan to value ratio mortgages, which will come into effect on the 1st of October. This is a positive step forward in addressing some of the issues immediately facing our economy; this and more tools will be needed, say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “We are happy to see the RBNZ explicitly recognising that actions beyond interest rates are needed. This helps to avoid significant negative effects on manufacturers and exporters that are associated with increasing the OCR; increasing the cost of capital and putting further pressure on an already overvalued exchange rate.”

“For a long time the export and import competing sectors have struggled with an overvalued currency, meanwhile the domestic economy and in particular the housing market is driving economic imbalance and threatening financial stability. The single interest rate lever cannot address both issues simultaneously.”

“Restricting the amount of high loan to value ratio mortgages that banks can hold is an important and long needed change; low equity loans carry the highest default risk in the face a financial shock.”

“There are other interventions open to the RBNZ and more might be needed, to better balance our economy.”

“I have already had a number of calls from exporters welcoming the move, and the evident commentary against the policy from those in domestic economy, suggests the RBNZ has, at long last, started to move in the direction of a sustainable, balanced economy.”


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