Property Institute applauds dumping of DTI plans

Media release

15 August 2017

Property Institute applauds dumping of DTI plans

Property Institute of New Zealand Chief Executive Ashley Church is applauding today’s decision, by Prime Minister Bill English, to take Debt-to-income ratios off the table as a tool available to the Reserve Bank.

Earlier this year the Reserve Bank asked for the Government to give it authority to use Debt-to-income ratios – a mechanism which would allow the Bank to limit what borrowers could borrow to a multiple of their income – and was in the process of completing a round of consultation before formalising use of the tool. However, at a press conference this morning the Prime Minister announced that the Government will not be giving the Reserve Bank authority to use this tool and also said that he saw no further need for extra tools for the Bank.

Mr Church says that the decision is ‘fantastic news for kiwis’.

”Finally, we’re seeing common sense prevail. DTIs would have been a draconian addition to an already over-regulated mortgage market and their introduction would effectively have locked first home buyers out of the market. We’ve been a strong vocal opponent of this idea since it was first suggested and have been preparing a submission that was due to be submitted to the Reserve Bank by the end of the week”.

Mr Church has also welcomed the Prime Minister’s comments calling on the Reserve Bank to give kiwis a timeframe for the removal of Loan-to-value rations. Mr English had suggested that the property market has come off the boil and that it was reasonable for people to expect the Reserve Bank to remove these restrictions.

”We absolutely agree. The Property Institute has led the charge against these restrictions for the past two years and we’ve been particularly vocal in our opposition to their imposition on first home buyers who have been squeezed out of the market by them. It’s encouraging to see that at least one political Party is waking up to the damage they’re doing and we can only hope that the incoming Reserve Bank Governor will take notice and exercise a more informed approach to the market”.

Mr Church says the other political parties now need to declare their hand on LVRs and DTIs prior to the election.

”It would be great to see a clear consensus on this matter so that we don’t find ourselves in this position again. Tools like these constitute an artificial constraint on the market and trade short term expediency for long-term solutions”.

“They’re not the way to solve our housing problems. The only real solution is to build a lot more houses, and the infrastructure to support them, as quickly as possible”.

*A copy of our (now redundant) submission on DTIs is attached

Ends

Draft_DTI_submission.docx

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