RBNZ Financial Stability Report: Easing cautiously off the brake – ANZ

Liz Kendall, Senior Economist at ANZ, points out that in its November 2018 Financial Stability Report, the RBNZ eased loan-to-value ratio restrictions modestly and the overall assessment is that New Zealand’s financial system is “sound” and “risks have abated a little over the past six months”.

Key Quotes

“The RBNZ assesses the New Zealand financial system to be sound. Domestically, risks related to the housing market have lessened: lending growth has slowed, fewer mortgages are on risky terms and house price inflation has slowed, especially in Auckland. With risks having abated a little, the RBNZ has eased loan-to-value ratio restrictions for both investors and owner-occupiers.”

“This is a modest loosening, in line with ANZ’s expectations. We anticipate that this easing will boost the housing market, but only a little, with the restrictions remaining “tight” overall.”

“We expect that further easing will occur in time, but that the RBNZ will continue to tread cautiously.”

“Although housing-related risks have reduced, dairy sector debt remains high and the industry is vulnerable to another downturn, while longer-term challenges loom large.”