LVR limits off the table (for now)

Limiting LVRs is one of four instruments the central bank has been considering adding to its regulatory “toolbox” to help cool off overheating credit markets and prevent rapid rises in house prices such as those seen between 2002 and 2007.

However, following the release of the central bank’s latest financial stability report, new Reserve Bank Governor Graeme Wheeler said that even if he could limit LVRs we wouldn’t do so at the moment.

Although several regulators overseas including in Canada and Israel have made such a move, Wheeler said there would have to be significant systemic risks for New Zealand to go down that path.

Wheeler made his comments despite the Reserve Bank’s report raising concerns about high levels of household debt and the increasing share of high-LVR loans in the mortgage market.