There was no reason to have just a simple tool that applied to all people, "it could be a graduated LVR rule". The Reserve Bank is proposing limits on the portion of high loan-to-value ratios that retail banks would be able to offer for new home lending as a means of taking the heat out of the housing market.
It has contemplated a mix of tiered limits saying that, for example, only 10 per cent of new home lending might be permitted with an LVR above 85 per cent; only 5 per cent with an LVR above 90 per cent and none above 100 per cent.
It also said there would be exemptions - citing Housing New Zealand's mortgage insure scheme.
Dr Norman was questioned about the LVR limits yesterday during a press conference he held to announce the Greens were renouncing their policy to print money to devalue the New Zealand dollar and help to rebalance the economy away from investment in the productive sector.
Dr Norman said Mr Key's comments on exemptions for first-home buyers "stepped into the realm of the Reserve Bank Governor's powers, rather than the Prime Minister's powers, there's no question about that".
But the Reserve Bank governor, Graeme Wheeler, was "a pretty robust fellow".
"I'm sure he can manage that kind of debate provided the Government isn't somehow putting on pressure behind the scenes - that is unacceptable."
Labour's finance spokesman, David Parker, said the trouble with Mr Key was he was too reliant on tools such as LVR limits because he would not "pull other levers" to take the heat out of the property market, such as a capital gains tax.
The OECD had said recently that the lack of a capital gains tax distorted investment and put upward pressure on house prices to the detriment of people who couldn't afford even one.
"The most important issue for first-home buyers is that their house is affordable."
