Wellington region will benefit from LVR adjustments

Grow Wellington, part of the new Wellington Regional Economic Development Agency, has welcomed the Reserve Bank’s decision to apply a regional distinction to its Loan to Value Ratio (LVR) policy and in particular the easing of the policy outside Auckland.

Grow Wellington Economist Jeremy Harding says the adjusted policy announced today, which eases lending restrictions outside Auckland, is good news for first home-buyers.

He says today’s announcement signifies a willingness to target policy responses as far as possible to the cities and regions where issues are sourced.

"For any town, city, or region within New Zealand not 'suffering' from an over-heated property market, the LVR policy has probably had a detrimental impact on economic growth and confidence."

"There is no doubt that New Zealand is currently experiencing a two-speed economy and one-size-fits-all policies are not always appropriate to address regionally specific issues such as the current Auckland housing boom."

"We’ve been advocating a targeted approach for some time and we are pleased to see an acceptance by the Bank that regional LVRs are worth pursuing."

Mr Harding says the altered LVR policy means that the Bank’s monetary policy may in time be less influenced by the Auckland housing market which could relieve pressure on the Official Cash Rate generally and may mean that businesses across the country can look forward to interest rate reductions sooner rather than later.

"We continue to believe the Reserve Bank should remove LVR limits for all regions not experiencing an overheated market," Mr Harding concluded.

ENDS

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