“I wouldn’t call it a back down,” RBNZ governor Graeme Wheeler said yesterday.
He says when the bank established its lending restrictions it “wanted to try and keep (them) as simple as possible.”
Part of the reason for this was to avoid any distortions and unintended effects.
Overall there are $4.5 billion of home loans a month and high LVR constructions loans only make up $45 million of the total.
When the bank was consulting on its restrictions it didn’t get any feedbank from banks or builders that not exempting new builds was a problem.
“We didn’t get feedback this was a significant issue,” he said.
However in the past month builders have been very vocal saying the restrictions were causing a loss of business.
Wheeler said it was sensible for the Reserve Bank to look at the issue again, particularly if it helped address supply side issues in the housing market. Hence the change in policy.
While the bank has made one change to its lending restrictions it is not looking at other changes.
Wheeler said the bank had looked at regional LVRs at the start but decided against them as they wanted a simple system.
Regional restrictions could created “distortions and spill overs at the waters edge”, he said.
Also the bank had the view that household price inflation would pick up in other regions outside of Auckland and Christchurch.
“We thought that household price inflation would pick up in the regions,” he said.
