Mortgage limits delayed, but not off the table — Finance Minister Steven Joyce

Finance Minister Steven Joyce isn't sold on debt to income limits yet. Photo / John Stone

The Government has asked for more information about a new tool which would put a cap on how much New Zealanders could borrow for a mortgage, but denies that it is putting the policy "on the back burner".

The Reserve Bank has sought Government approval to use debt-to-income (DTI) limits as a way of cooling the housing market.

Joyce said today he wanted a full cost analysis and public input before he made any decision about the policy.

"I have discussed DTIs with the Reserve Bank Governor, who remains concerned about the levels of debt in some households in the context of recent increases in house prices," he said.

The Reserve Bank will consult with the public on the proposed policy between March and June.

But Joyce said this delay did not mean the Government was "putting it on the back burner".

Although the bank wanted access to DTIs, it did plan to not use them immediately, he said. That meant Government had time to fully consider their potential impact.

Joyce said he was particularly interested in their impact on first home-buyers.

If introduced, the restrictions would restrict what New Zealanders could borrow for a mortgage relative to their income. It is used in the United Kingdom, where buyers cannot get a mortgage higher than 4.5 times their annual earnings.

To introduce DTIs, the Government and the bank would have to amend their Memorandum of Understanding.

That agreement currently allows the bank to use a range of tools, including loan-to-value ratio limits.

Act Party leader David Seymour opposed the policy, saying it gave a "systematic advantage" to those who could borrow money from overseas banks.

There was no way the Government could monitor financial transactions worldwide, he said.

"It's another case of the Government desperate to be seen doing something about the housing crisis, without considering whether its attempts to curb demand will work, or what other consequences might follow."