28 Mar 2011

Bank may be considering mortgage caps

9:19 pm on 28 March 2011

Restrictions on how much banks can lend as a percentage of a property's value may be at the top of a list of changes under consideration by the Reserve Bank.

The measures are being pushed by global regulators and aim to curb the excessive credit growth that led to the financial crisis, and to build up banks' capital reserves to deal with a sharp fall in house prices.

A former Reserve Bank chief economist, David Mayes, says capping how much banks can lend as a percentage of a property's value would be an obvious measure to adopt.

He says 70% as a maximum loan-to-value ratio is seen as a global benchmark.

But one Auckland mortgage broker, Christine Lockie, says that would wipe out half of new home buyers.

A Reserve Bank spokesperson says the bank may make more comment on possible options in May.