Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr claimed it would be difficult to exempt some residential property buyers, particularly investors, from debt-to-income (DTI) restrictions.
In last week’s RBNZ annual review to Parliament’s Finance and Expenditure Committee, Orr reiterated the central bank’s request for adding DTIs to its toolkit to regulate banks, allowing it to restrict bank lending to borrowers seeking too much debt relative to their income.
When asked whether DTIs could be targeted to investors, Orr said it would be difficult to segment any market and individual with macro-prudential tools.
“The phrase ‘macro’ means it’s the same tool for all. So, pretending we could fine-tune for a particular set or groups comes with great challenge and implications,” Orr said, as reported by Interest.co.nz.
“Identifying the investor, the bright-line test, the complexities of a debt-to-income tool has a whole lot of work needed in the background to understand who is facing it, how is it being deployed. It is again, not too dissimilar to loan-to-value ratios (LVR), but comes with challenge.”
Meanwhile, Finance Minister Grant Robertson expressed his concern about giving the RBNZ DTIs.
“I’ve said in the past that I am somewhat sceptical of that and the effect it will have on first-home buyers. But obviously, we live in a dynamic world, and so I’m still receiving advice. We haven’t made a decision,” Robertson said, as reported by Interest.co.nz.
He added that he is still seeking advice on considering giving DTIs to the RBNZ if they were only applied to investors.