The Reserve Bank’s dropping fairly firm hints that it might be about to start removing the restrictions on high loan to value lending (LVRs), with a decision possibly set to be announced late this month.

The LVR restrictions, one of the RBNZ’s ‘macro-prudential’ tools, fall under the gamut of the bank’s financial stability role.

The bank is due to give its next Financial Stability Report on November 29. The FSRs are generally the forum in which the RBNZ has previously tackled issues relating to the housing market.

Since the RBNZ applied the latest iteration of the LVRs, the 40% deposit limits for housing investors, last year, the housing market has eased considerably, with prices now close to flat.

Prior to the election, both the Labour Party and the National Party had suggested they would like to see the LVRs gone soon.

In releasing its latest Monetary Policy Statement on Thursday, the RBNZ expressed a more confident view than previously that house price pressures would remain off in the foreseeable future.

Acting Governor Grant Spencer suggested that some of the new policies being implemented by the new Government, including Kiwibuild, the expansion of the Bright Line test out to five years, the ban on offshore ownership of existing houses and the upcoming taxation review, would help to keep investor demand for housing at a moderate level.

“We are projecting house price inflation to stay quite low.”

Asked at the media conference, after the release of the MPS, whether the RBNZ was therefore now considering lifting the LVR restrictions, Spencer said: “We are certainly reviewing the restrictions and the criteria that we would adopt for their removal.

“We’ll be saying more about that at our Financial Stability Review, which is in a couple of weeks. We’ll talk a little bit more about the LVRs and those criteria at that point.”

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