How DTIs will affect investors

CoreLogic chief property economist Kelvin Davidson explains how DTI ratios could impact property investors.

He says changes seem almost certain to be imposed from about March 2024 and have become an even greater likelihood since the RBNZ’s surprise move to loosen loan-to-value (LVR) ration restrictions earlier than anticipated.  

Davidson says here’s where things stand and some key unknowns:

• We don’t know what the DTI limits will be. Will the RBNZ introduce a cap of seven times that of income, regardless of borrower type? Could there be exemptions introduced for new-builds? Is a speed limit system likely, as per the existing LVR rules?;
• We do know the RBNZ already has permission to impose them;
• Banks will look at “all” income and debt when calculating DTIs, incorporating existing loans as well as the potential new mortgage that’s being assessed; and
• The rules will not apply to non-bank lenders.