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Robertson to require the RBNZ to consider house prices when setting monetary policy and through the way it regulates banks; Seeks more info on DTIs and interest only mortgages

By Jenée Tibshraeny


Finance Minister Grant Robertson has decided to change the remit of the Reserve Bank’s (RBNZ) Monetary Policy Committee, requiring it to “take into account government policy relating to more sustainable house prices”.

“The Committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes,” Robertson said.

The RBNZ very vocally opposed Robertson’s proposal late last year to require it to consider house prices when setting monetary policy, arguing it would rather be made to consider house prices through the way it regulates banks.

Robertson decided to move on this too.

A direction has also been issued to the RBNZ (under section 68B of the Reserve Bank Act) requiring it to have regard of government policy on housing in relation to its financial policy functions.

“The Bank will have to take into account the Government’s objective to support more sustainable house prices, including by dampening investor demand for existing housing stock to help improve affordability for first-home buyers,” Robertson said.

“The Reserve Bank’s objectives and mandate remains the same, which is to maintain price stability, support full employment and promote a sound and stable financial system.”

Robertson also asked the RBNZ to provide advice on debt-to-income ratios and interest only mortgages.

“I want to understand the extent to which interest-only mortgages (particularly to speculators) pose risks to financial stability, and whether restrictions should apply. Some jurisdictions, like Australia, have in the past applied restrictions on interest-only mortgages due to financial stability risks,” he said.

“Following the Bank’s request that the Government allow it to make use of tools such as debt-to-income ratio limits, I’ve asked for further advice on how the Bank might implement such tools. I have made clear that in principle I would want these to apply only to investors. It’s important that any potential restrictions do not disproportionately affect first-home buyers and low-income borrowers.

“Today’s announcement is just the first step as the Government considers broader advice about how to cool the housing market.

“We know the rapid increases we have seen in recent months are not sustainable, which has meant many first-home buyers are struggling to access the market. We’ll be making further announcements in the coming weeks on other policy responses.”

This story was originally published on and has been republished here with permission.