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New Zealand proposes new nationwide restrictions on property lending

The ReserveBank of New Zealand proposed new nationwide restrictions onloan-to-value ratios to further mitigate risks to financial stability from highhouse prices.

The central bank said July 19 that the new restrictionsrecognize the risks of property lending to the banking system, as residentialmortgages make up 55% of banking system assets.

Under the proposed restrictions, no more than 5% of banklending to residential property investors across New Zealand will be allowed aloan-to-value ratio of greater than 60%, or a deposit of less than 40%. Inaddition, no more than 10% of lending to owner-occupiers will be allowed aloan-to-value ratio of greater than 80%, or a deposit of less than 20%.

The proposed restrictions will take effect Sept. 1. Theconsultation period for the proposals concludes Aug. 10.

The central bank had tightened loan lending restrictions in Auckland in 2015as house prices surged in the city. The latest proposals will remove thecurrent distinction between lending in Auckland and the rest of the country.

The central bank is also working on possible limits to highdebt-to-income ratio lending, said RBNZ Governor Graeme Wheeler.