WELLINGTON, New Zealand--High New Zealand house prices are a risk to future financial and price stability, Reserve Bank Deputy Governor Grant Spencer said Tuesday.
Easy credit in the early 2000's fueled a housing bubble the central bank tried to control--with little success--by boosting the policy interest rate.
With so much of the country's wealth tied up in housing, when prices did eventually fall the economy dipped into recession, even before the global financial crisis.
Now, with New Zealand's interest rates at record lows since March 2011, the housing sector could be heading down the same path again. New Zealand house prices "are now rising rapidly once more," Mr. Spencer said in a speech published on the bank's website.
New restrictions on bank mortgage lending introduced Oct. 1 are aimed at moderating house price inflation by reducing the effective demand for housing, Mr. Spencer said in a speech published on the central bank's website.
Under the new rules, no more than 10% of bank's new mortgage lending can go to borrowers who put down less than 20% of the property price as a deposit.
The rules are intended to reduce the build-up of risk in the New Zealand financial system, said Mr. Spencer. They could also potentially reduce the extent of interest rate increases that may be needed, he said.
nasdaq.com
Easy credit in the early 2000's fueled a housing bubble the central bank tried to control--with little success--by boosting the policy interest rate.
With so much of the country's wealth tied up in housing, when prices did eventually fall the economy dipped into recession, even before the global financial crisis.
Now, with New Zealand's interest rates at record lows since March 2011, the housing sector could be heading down the same path again. New Zealand house prices "are now rising rapidly once more," Mr. Spencer said in a speech published on the bank's website.
New restrictions on bank mortgage lending introduced Oct. 1 are aimed at moderating house price inflation by reducing the effective demand for housing, Mr. Spencer said in a speech published on the central bank's website.
Under the new rules, no more than 10% of bank's new mortgage lending can go to borrowers who put down less than 20% of the property price as a deposit.
The rules are intended to reduce the build-up of risk in the New Zealand financial system, said Mr. Spencer. They could also potentially reduce the extent of interest rate increases that may be needed, he said.
nasdaq.com
No comments:
Post a Comment