Debt to income restrictions

Debt to income restrictions

Hopes of getting a mortgage dashed?

More than 10,000 house hunters could have their hopes of getting a mortgage dashed if the Reserve Bank were to deploy the debt to income restrictions it is currently seeking to add to its regulatory powers.In a consultation document released today the RBNZ suggests that limiting lending at a debt ratio of five times income could be appropriate if house prices rise sharply.

There’s only so many tools the banks can use and they’re powerful

Reserve Bank Governor Graeme Wheeler has stressed that the regulations would not be deployed in the current market conditions but would like to see them added to the tool box to deal with any further acceleration of house price growth in Auckland and some other regions has cooled significantly in the past six months.

The bank estimates of 78,200 mortgages issued for housing each year some 10,400 would be blocked by restriction set a debt limit at five times income.

Of that number just 1600 would be first-home buyers, 700 other owner-occupiers, and would be 8800 investors.