LVR restrictions could work: NZPIF

In its Financial Stability Report, the Reserve Bank said that banks had relaxed their credit criteria over the past year.

"Discussions with banks suggest that high loan-to-value ratio (LVR) loans are now beginning to form a significantly larger share of new mortgage lending than has been the case for most of the period since the financial crisis," it said.

"However, with households still relatively indebted and house prices remaining overvalued on some metrics, banks will need to remain alert to the risks associated with a marked acceleration in credit growth to the household sector."

Regulation of LVR levels is one of four instruments that are being looked at to increase economic stability by smoothing credit growth during house price booms.