RBNZ: Households remain exposed to financial shocks due to their large mortgage debt burden

Below are some key takeaways from the Reserve Bank of New Zealand's (RBNZ) recently published Financial Stability Report, as highlighted by Reuters.

• To ease loan-to-value ratio restrictions.
• Households remain exposed to financial shocks due to their large mortgage debt burden.
• Mortgage credit growth and house price inflation have eased to more sustainable rates.
• If banks’ lending standards are maintained we expect to further ease LVR restrictions over the next few years.
• The domestic banking system remains sound at present.
• Will reassess whether the banking system has sufficient capital to weather future extreme shocks.
• Preliminary view is that higher capital requirements are necessary.
• Up to 20 percent (increased from 15 percent) of new mortgage loans to owner occupiers can have deposits of less than 20 percent.
• Up to 5 percent of new mortgage loans to property investors can have deposits of less than 30 percent (lowered from 35 percent).