The Reserve Bank's restrictions on home lending have "changed the game" for New Zealand's banks and created unintended consequences, according to a report by KPMG.
The accountancy firm today released its annual Financial Institutions Performance Survey report taking into account the performance of the banks, finance companies and savings institutions.
KPMG partner John Kensington said the introduction of the 10 per cent new lending limit to borrowers with equity of less than 20 per cent had shifted the action in the market.
"Before the LVR [loan to value] rule change the banks were probably writing 20 to 30 per cent of their mortgages a month with a greater than 80 per cent LVR, now, they're probably writing 4 to 6 per cent of them with a greater than 80 per cent LVR.
"In short, there's going to be spirited competition for anyone who has a good loan, be it a household mortgage or a corporate."
"If, however, they do not ease the house price bubble, and also keep people out of the market at a time when they could be investing, this would be undesirable."
Kensington said one effect of the change was that banks were now less likely to offer incentives such as "put your new car on the mortgage".
A further impact was that first home buyers had been left questioning whether raising enough capital for a deposit would even be possible.
"A second group of respondents ... may decide that they will be renters for the rest of their lives."
The report points to the attitude change as the reason behind some of the economic upturn seen at the end of last year, particularly at finance companies which had seen a "large increase in requests for personal, boat, car and jetski-type of loans".
But it also noted that it would be a while before the full impact of the restrictions were known.
"If the restrictions avoid a price bubble, and continue to operate until such time as a great supply of property can come online, particularly in Auckland and Christchurch markets, they will have been a success.
Kensington said the banking sector had a solid 2013 with profits rising 8.61 per cent.
He warned that regulatory reform would be an ongoing challenge in 2014 and banks would also face pressure from customers moving from floating to fixed mortgages, and competition.