RBNZ prepares curbs on debt service

Central bank is concerned by “very high debt” and “unsustainable house prices”

Photo: Rachael King

The Reserve Bank of New Zealand is considering two new macro-prudential tools, as it looks to toughen its stance on “debt serviceability”.

One option is to impose a cap on debt as a multiple of income, the central bank says in a consultation document published today (November 23). The second is impose a floor on “test interest rates” that banks use to assess borrowers’ ability to pay back loans.

“Although the financial system remains strong and banks are well-capitalised, we are concerned that

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