ZB ZB
Live now
Start time
Playing for
End time
Listen live
Listen to NAME OF STATION
Up next
Listen live on
ZB

Reserve Bank wants new rules for property investors

Author
Laura Heathcote ,
Publish Date
Fri, 6 Mar 2015, 5:24AM
File photo (Getty Images)
File photo (Getty Images)

Reserve Bank wants new rules for property investors

Author
Laura Heathcote ,
Publish Date
Fri, 6 Mar 2015, 5:24AM

Updated 9.08am: Landlords are again in the spotlight, following confirmation the Reserve Bank wants new rules for loans to property investors.

The central bank wants to treat loans for property investment differently from loans used for owner-occupiers. Steeper lending charges are widely expected.

The bank's consulting with commercial banks on how to define a property investment loan.

Mortgage broker Sue Tierney says the prospect of higher interest rates for investors will be a concern, although tenants will be the ones ultimately hurt.

"They're the ones who are going to be paying higher rent, as the landlord tries to recoup the cost of owning this property."

The Reserve Bank says this is because international evidence shows loss rates and defaults during downturns, tend to be higher for loans on residential property investment.

Broker Sue Tierney disagrees.

"They are referring to the Irish market, UK market, and as a mortgage broker I get reports every month from lenders telling me what the defaults are, and they are not property investors at all."

Westpac economists are downplaying the impact of any moves to toughen lending conditions for property investors.

Senior economist Satish Ranchhod says the proposed policy is aimed at banking sector stability, and ensuring lenders hold an adequate safety buffer in the event of a crisis.

He says an increase in the average cost of funding for banks would be passed on to borrowers.

As for the effect on housing demand, Mr Ranchhod says past studies have shown the impact would be equivalent to no more than a single OCR hike.

Reserve Bank Governor Graeme Wheeler is being accused of acting like King Canute in trying to slow demand in Auckland's housing market.

The Property Institute's Ashley Church is comparing the bank's attempts to the famous king who futilely tried to turn back the ocean's tide.

Mr Church says that's not the answer to solving Auckland's problem.

"When there are enough homes to meet demand, at that point prices would settle, and house price inflation will fall off. Anything else is simply a roadblock."

Take your Radio, Podcasts and Music with you