DTIs on investment property don’t make sense

While property values last year closed on a strong note with three consecutive rises, any recovery this year could undershoot expectations and prove a little underwhelming, Kelvin Davidson, CoreLogic’s chief economist says.

“A lot hinges on how mortgage rates move and how any fall is counteracted by tighter lending restrictions from the Reserve Bank, such as DTIs.”

Finance Minister Nicola Willis and ACT leader David Seymour have said in the past they are not in favour of them but Kris Pedersen, who owns a mortgage advising business, believes they will be introduced although he is not a big fan.

He believes the Reserve Bank will keep the ratios at a high setting – probably about seven times income. “They won’t initially have any effect on the overall housing market because banks’ test rates are high and act as a stricter measure than DTIs right now. Maybe in a couple of years’ time when test rates have dropped the market will see their effect.”