DTI cap for mortgage lending slammed by critics

The finance minister has welcomed the RBNZ consultation on DTI limits but the idea has been slammed by the opposition and the Property Institute

DTI cap for mortgage lending slammed by critics
Last week the Reserve Bank launched a consultation on implementing debt-to-income (DTI) limits for mortgage lending and it didn’t take long for some to speak out.

The proposal was welcomed by Finance Minister Steven Joyce, who had asked for a full cost-analysis from the central bank, which has suggested the new tool late last year.

"The use of Debt to Income ratio restrictions would be a significant intervention in the housing market, so it's important that all interested parties have their say during this consultation period," Joyce said in a statement released last week.

Meanwhile, Labour’s Grant Robertson slammed National for its “nine years of denial” about the housing market and warned that DTI caps would block thousands of young New Zealanders from homeownership.

“The introduction of across-the-board debt to income ratios for home lending would punish first home buyers struggling to get into the housing market,” Robertson warned.

He added that limits on speculators may be appropriate but said broad DTI limits would not be supported by Labour and that the Finance Minister needs to tell New Zealanders if National is on the side of first home buyers or not.

The Property Institute’s chief executive Ashley Church is also against DTI limits.

He warned that it would worsen the Auckland housing crisis with a knock-on effect for the New Zealand economy. He said that it would lead to a decline of home building in the city and would likely mean an increase in rent too.

Mr Church called on the RBNZ to consider how the DTI cap may seem like a good idea at the time in order to protect the financial system but would lead to an even bigger problem later on.