New Zealand Cenbank to finalize debt service reduction framework for mortgages by end of 2022

A security guard stands at the main entrance to the Reserve Bank of New Zealand in central Wellington, New Zealand July 3, 2017. REUTERS/David Gray

April 27 (Reuters) – The Reserve Bank of New Zealand said on Wednesday it plans to finalize a framework on debt service restrictions (DSRs) on residential mortgages by the end of 2022 and can l introduce, if necessary, by mid-2023.

The RBNZ had sought comment on the merits and design features of DSRs on residential mortgages from banks, industry and the public in November as it deals with a hot housing market.

The central bank said first-time home buyers would likely be the least affected by a debt-to-income restriction (DTI), a type of DSR that places a cap on the amount of debt a borrower owes. as a multiple of income.

He added that bank test interest rates have started to rise in line with market rates and a slowdown in high DTI lending is expected in the coming months.

The RBNZ also said it saw no urgency in imposing an interim test floor, used by banks to test borrowers’ ability to continue repaying their loans if interest rates hit a certain level. , at this stage.

He added, however, that he was monitoring the situation closely and was not ruling out the option if there was a resurgence of subprime lending in the housing market.

Reporting by Harish Sridharan in Bangalore

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