He says the housing market is spiralling out of control
ASB Bank senior economist Mike Jones is warning the Reserve Bank of New Zealand (RBNZ) that the housing market continues to spiral out of control, so reinstating lending restrictions is a must.
The RBNZ temporarily removed loan-to-value ratio (LVR) restrictions amid the COVID-19 pandemic to allow banks to sell mortgages to buyers with small deposits.
However, Jones said the housing market might be too far gone if the LVR pause continues until May next year.
“The dropping of LVR restrictions in May has enabled a little more highly leveraged lending to occur than might otherwise,” Jones told Morning Report.
He added that he did not expect the country to be in a “deep recession, but strangely enough, we've also had a housing boom. There is some merit in rolling back to [LVR] restrictions.”
“If it [Reserve Bank] did wait until May next year, it would risk letting the cat out of the bag ... and the housing boom would get a little bit further away from us.”
However, Jones warned that the Reserve Bank should ensure that reinstating LVR restrictions would not interfere with the mortgage holiday scheme.
