"The Reserve Bank made it pretty clear that a carve-out in one area would simply mean tighter restrictions in another," he said.
Mr Cunliffe said the Reserve Bank had simply ignored Mr English, "and have come up a with a policy which is not helping New Zealanders get into their own homes".
If elected, Labour would exempt first home buyers from the new lending limits until its capital gains tax took hold and KiwiBuild low-cost housing policies took effect.
Mr Cunliffe indicated that could be achieved after amendments to the Reserve Bank Act to change the relationship between the Government and the bank to ensure the bank's settings were consistent with government policy on housing.
Mr English said Labour was suggesting removing the Reserve Bank's independence, "which would be quite a big policy shift ... that's been a pillar of New Zealand's economic policy for 30 years".
Labour finance spokesman David Parker said the exemption would be done without removing the Reserve Bank's independence.
Mr Cunliffe said he believed the different policy framework under Labour's changes would have led Reserve Bank Governor Graeme Wheeler to make a different decision over the lending limits for first home buyers.
Shaun Drylie, general manager product and strategy at the ASB said: "ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration."
Caught out by ASB's change
ASB's policy has left one Auckland couple scrambling to keep a section they were going to build their first home on, while still having money to pay for their wedding in February.
The couple, who did not want to be named, were pre-approved for a 14 per cent deposit last month and settled on the West Auckland section.
"It's left us a little bit scrambling because the deposit would require an additional $15,000 to $20,000 which is money that we have and was going to go toward our wedding.
"So we are having to look at putting all our savings into that deposit and setting us back six months of saving for our wedding."
The couple will have to delay the building of their house, meaning they will be paying a mortgage as well as rent for their current accommodation.
"The reason we went to ASB was they were the only ones willing to consider a lower deposit. This was all at a time when the Reserve Bank was making noises about bringing in LVR criteria so why did they even give us the pre-approval?"
ASB's general manager product and strategy Shaun Drylie said the bank encouraged affected customers to make contact to discuss their circumstances.
"We appreciate that this will be disappointing for customers who are impacted and we apologise for any inconvenience caused."
The banks' positions
ASB Bank: Has cancelled loan pre-approvals for high loan-to-value ratio loans and is encouraging affected customers to contact it to discuss new pre-approved loan offers.
ANZ: Continues to honour existing mortgage pre-approvals and is still considering new mortgage applications over the 80 per cent loan-to-value ratio.
BNZ: Says it expects to continue honouring existing loan pre-approvals.
Westpac: Says it is monitoring the situation and will do "what is required to comply with the Reserve Bank rules''.
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