Moves to dampen surging house prices - especially in the Auckland market - came from two directions yesterday.
The Deputy Governor of the Reserve Bank revealed the bank was looking at new tools to cool demand for houses, including limiting 100 per cent mortgages.
Grant Spencer indicated the bank was considering measures to regulate bank lending and reduce the risk of a housing bubble, with a public consultation document to be released in March. One of the more controversial measures could involve the introduction of loan value ratio restrictions which would limit the ability of banks to lend buyers up to 100 per cent of a property's value.
The bank will also look at "risk weighting" or the amount of capital banks need to set aside to cover losses.
At the same time, Prime Minister John Key reiterated his Government's determination to force councils to open up land for new houses, which it hopes will ease the pressure on record prices.
He effectively threatened to legislate if councils do not do what the Government wants in order to get more houses built more cheaply.
"If councils aren't able to change their planning processes, then the Government would have to get a lot more proactive because we are very serious about resolving this issue."
The Prime Minister's comments came as housing affordability became a hotter political issue.
They were immediately condemned by Auckland Deputy Mayor Penny Hulse, who pointed the finger at the Government for a lack of action.
But Mr Key, speaking during his state of the nation speech on the North Shore yesterday, said it was absurd that developers could wait six to 18 months for a resource consent.
"It's ridiculous that we allow councils to demand almost anything as a condition for the consent. Unless these sorts of issues are dealt with there won't be more affordable housing built."
However, Ms Hulse, who was in the audience for the speech, maintained that the Government was to blame for not helping the council to speed up the process in the Auckland region.
And she said the community, including Mr Key's own neighbourhood of Parnell, demanded to be involved in the process.
Ms Hulse said the proposed planning rules in the unitary plan (an amalgamation of former district plans) would provide many of the answers needed to speed up the process by cutting red tape and simplifying processes. She said it should be given legal effect as soon as the plan is publicly notified in September or October.
But the Government was making the council wait for three more years to 2016 before it could take effect.
"We've got three more years of frustration.
"The key thing we need now is for the Government to be genuine about making a difference and allowing that unitary plan to have legal weight as soon as it is notified at the end of the year."
Affordable housing is becoming a political battleground, with the latest Herald-DigiPoll survey showing strong support for Labour's promise to build 100,000 houses in 10 years.
And the Greens issued a home-buying plan this week that would allow low and middle income earners a way to buy a government-built home without a deposit or a mortgage.
Meanwhile, renewed price-cutting by two banks this week is likely to spark even lower offers.
ASB led the way on Monday, reducing its rates fixed for three, four and five years by 0.15 per cent. Its four-year rate became the market leader at 5.95 per cent.
Westpac is offering 4.99 per cent fixed for two years.
Mortgage approvals reached their highest levels in almost four years last month as people rushed to make the most of low interest rates.By Nicholas Jones Email Nicholas, Audrey Young Email Audrey