The Reserve Bank of New Zealand intends to finalise a framework on debt servicing restrictions on residential mortgage lending by late 2022 and be able to introduce it by mid- 2023, according to a framework on debt servicing restrictions DSRs on residential mortgage lending.
In November, the RBNZ asked for feedback on the merits and design features of DSRs on residential mortgage lending from banks, the industry and the public, as it deals with a red-hot housing market.
The central bank said that first-home buyers are likely to be impacted the most by the debt-to-income DTI restriction, a type of DSR that imposes a cap on how much debt a borrower owes as a multiple of income.
It added that test interest rates of banks have begun to rise in line with market rates, and a slowdown in high-DTI lending is expected to occur in the next few months.
The RBNZ said that it does not see an urgent need to impose an interim rate floor, which is used by banks to test the ability of borrowers to continue repaying loans if interest rates rise to a certain level at this stage.
It said it was monitoring the situation closely and did not rule out the option if there was a resurgence of risky lending in the housing market.