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Reserve Bank Releases Debt-to-Income Framework


The Reserve Bank of New Zealand – Te Pūtea Matua is releasing its finalised debt-to-income (DTI) restriction framework that sets the technical specifications that banks need to comply with if a DTI tool is activated.

Publication of the framework does not immediately activate DTI restrictions or set a calibration for them, Director of Prudential Policy Kate Le Quesne says.

“Instead, it provides banks with clarity in terms of the definitions of debt and income and future data reporting requirements, and it provides them with a timeframe for making any changes to their internal systems and processes to be able to comply with a possible DTI restriction in future.”

“DTI restrictions on residential mortgage lending, when implemented, set limits on the amount of debt borrowers can take on relative to their income. This supports financial stability by limiting higher-risk mortgage lending, thus reducing the likelihood of a future housing-related financial crisis,” Ms Le Quesne says.

“This in turn helps us to meet our statutory objective of ‘promoting the maintenance of a sound and efficient financial system,” Ms Le Quesne says. ”By linking credit availability to income growth, DTI restrictions complement other tools we use to support financial stability, including loan-to-value ratio (LVR) restrictions on residential mortgage lending.”

We announced our decision to add DTIs to our macroprudential policy toolkit in April 2022 and a public consultation on the exposure draft of the DTI framework was held in November 2022.

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“Stakeholders were generally supportive of the proposed design of the DTI framework and agreed with our overall approach to keep the framework simple and clear,” Ms Le Quesne says.

The finalised DTI framework is being released alongside a regulatory impact statement, non-technical summary, and a summary of submissions document that contains our responses to the key issues raised in the consultation.

Matters clarified in the framework include the treatment of personal debt in DTI calculations, the calculation of business income, and the treatment of complex lending situations.

Banks will be given 12 months to prepare their systems for possible implementation of DTI restrictions. Therefore, the earliest date we would do this is likely to be March 2024.

More information

Debt serviceability restrictions

Feedback sought on design of Debt-to-Income restriction framework, November 2022

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