Zealand: Cent and Bank

zealand: Under the proposed changes, no more than 5 per cent of bank lending to residential property investors across New Zealand would be permitted with a loan-to-value ratio of greater than 60 per cent, or a deposit of less than 40 per cent, according to Australian Broadcasting Corporation. The loan-to-value ratio is a measure of how much a bank lends against mortgaged property, compared to the value of that property. Related Story: NZ central bank threatens new home loan crackdown Map: New Zealand The Reserve Bank of New Zealand has released a consultation paper that proposes new restrictions on home loans that will bring the rest of the country in line with those currently in place in Auckland. For example, the RBNZ stated that borrowers with less than 20 per cent deposit are often stretching their financial resources. The Reserve Bank considers a sharp correction in house prices to be a key risk to the financial system, and one that is increasing the longer the current boom in house prices persists. "A severe downturn in house prices could have major implications for the banking system, with more than 55 per cent of bank assets secured by residential property." Restrictions would begin from September The proposed new restrictions would take effect from September and remove the current lending distinction between Auckland and the rest of the country. For owner-occupiers, the proposed changes would mean no more than 10 per cent of lending would be permitted with an LVR of greater than 80 per cent, or a deposit of less than 20 per cent. (news.financializer.com). As reported in the news.