RBNZ review lends support to loan-to-value limits

Deputy governor Geoff Bascand: “Based on the experience of the past five years we’ve updated our strategy”

A review by the Reserve Bank of New Zealand finds the loan-to-value ratio (LVR) limits it first imposed in 2013 have been effective in promoting financial stability, but that the tool’s impact is significant, so it should be used with care.

The research, by Bruce Lu, finds the LVR policy, first used in October 2013, mitigated the scale of possible house price falls and restricted the indebtedness of households, making the financial system “more resilient to a housing-led downturn”. Lu adds the

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