Close watch for house loan hints

Grant Spencer.

Bankers Association says capping lending over 80 per cent threshold could spark third-tier lenders to emerge

The finance industry will be looking out for any hints of more detail from the Reserve Bank today around new rules designed to help slow the rampant housing market.

Deputy Governor Grant Spencer is to make a speech at 11am on macro-prudential policy and the New Zealand housing market in Wellington.

A Reserve Bank spokesman confirmed it would be releasing a statement after the speech but would not detail what would be in the speech.

David Tripe, a banking expert at Massey University, said Spencer may use the opportunity to present more details on the policy, which includes four main concepts intended to help curb destabilising growth in debt or asset prices.

The potential use of speed limits on high loan-to-value (LVR) lending is the tool seen as being most likely to be introduced first.

Those limits could restrict the share of a bank's lending able to be given to borrowers who have a deposit of less than 20 per cent.

The Reserve Bank is in the process of consulting the industry on its policy plans with submissions due to close on Wednesday.

Tripe said being under consultation had not stopped the Reserve Bank in the past from coming out with more details.

Last month Prime Minister John Key put pressure on the central bank to exempt first home buyers from lending limits amid fears potential changes would stop some getting a foothold on the property ladder.

But so far the Reserve Bank has appeared to be lukewarm on the idea.

Kirk Hope, chief executive of the New Zealand Bankers Association, said he didn't expect any big announcements as the detail wasn't due to be finalised until mid-July.

Hope said the association was in the process of finalising its submission to the consultation but its analysis of data from the major banks showed there had been virtually no growth in high loan-to-value ratio loans (over 90 per cent) since 2008 despite solid growth in the housing mortgage market.

"We have got some data on LVRs which suggests they are over egging the whole story."

Hope said while the Reserve Bank might argue that 50 per cent of new lending was over the 80 per cent threshold, lending growth was low so it was not having a significant impact on total lending portfolios.

According to its figures nearly 80 per cent of the country's $188.34 billion housing loan book had a loan to value ratio of less than 80 per cent as of December 31.

Hope said there was a risk that in capping the amount of lending done over the 80 per cent threshold it could spark third tier lenders to emerge and lend money on an unsecured basis.

"It's counter-productive."

Hope said he also believed the next round of bank disclosures would reveal a shift away from high LVR lending. "I think the banks have just slowed right down."