UPDATED 7.21am: The Government is being accused of being blind to the housing problem, as major banks move to stop lending to foreign buyers.

LISTEN ABOVE: Banking expert David Tripe speaks to Rachel Smalley on KPMG Early Edition

MORE: Banks cut off lending to foreign property investors

Westpac and ANZ have both announced they will no longer lend to non-resident mortgage borrowers as they move to minimise lending risks in a buoyant property market.

Labour MP Grant Robertson believes the bank is responding to the risk of a property bubble bursting.

"This is a situation where we have a property market in Auckland that is out of control, they are lending in that market and they are worried about the risk exposure they have," he said. "I just wish the Government was as concerned about the risk exposure that New Zealand has."

"If people like Westpac, who make a lot of money off foreign buyers, are saying we need to restrict lending, then the Government needs to take this issue far more seriously."

A banking expert says there are several reasons why the New Zealand arms of two Australian-owned banks have tightened their lending restrictions.

Massey University associate professor David Tripe told Rachel Smalley the main reason is that the Australian regulatory authority - APRA is pulling the strings.

"APRA is also telling the banks in Australia that they are concerned about high risk loan portfolios, and loans to foreign investors."

David Tripe said there's a desire from both the Reserve Bank and the banks to make sure they don't have too high a risk loan portfolio.

"One of the reasons that you might want to reduce the risk in your loan portfolio is because you might think there is some risk of a housing crunch."