The Reserve Bank has fine-tuned the regime to restrict home-lending for borrowers with small deposits, but reiterated that banks will get just two weeks' notice before any new rules are imposed.
The central bank has settled on a "speed limit" approach to proposed restrictions on high loan-to-value ratio mortgage lending, effectively reducing the volume of low-equity lending banks can offer in a given period rather than banning it outright.
In response to the consultation period, it will give lenders a six-month window in which low-equity lending limits are measured at an average rate, then impose the restrictions for lending in excess of $100 million a month over a three-month average rate. Banks with mortgage lending below $100 million a month will be expected to meet the speed limit over six-month rolling windows.
Deputy governor Grant Spencer reiterated that any decision to impose the restrictions would be announced two weeks before they took effect. The penalty for breaches would be in line with its supervisory and enforcement practices.
It has been looking at introducing the restrictions as part of its new macro-prudential tools to help cool asset bubbles, and as property markets in Auckland and Christchurch are spurred by a lack of housing supply.
