Will macroprudential tools get the right results?
Of the four in question, loan-to-value restrictions have had the most attention – probably because they are the easiest for most people to understand.
Unlike the others, which largely relate to how much capital banks need to have on hand to offset various types of lending, LVR restrictions would dictate whether or not you can buy that $500,000 house with a 5% deposit.
And apart from the occasional commentator who has said such restrictions might sometimes save overly-eager borrowers from themselves, most of the early feedback on LVR restrictions hasn't been good.
We've heard all sorts of criticism, from such a restriction being hard to police, and inappropriate if introduced nationwide,through to the suggestion that LVR restrictions would have little effect beyond tilting the market in favour of wealthy buyers.
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