An economist says restricting the amount that banks can lend on houses shouldn't be first cab off the rank for the Reserve Bank when it finally comes time to use new powers to dampen the housing market.
Negotiations are continuing between the central bank, the Treasury and the Minister of Finance's office over when so-called macroprudential tools should be used.
The tools would be an alternative means of reining in the housing market without the Reserve Bank having to raise the Official Cash Rate.
Restricting loan-to-value ratios has attracted the most attention since the bank signalled over two years ago that it was developing new options to dampen the housing market and has been in the spotlight again recently as the market in Auckland has picked up.
But Deutsche Bank chief economist Darren Gibbs says he is not convinced that raising equity requirements for borrowers is the best option from the tools being considered by the central bank.
"Banks are required to hold capital against different types of lending. I think if you change the capital requirements for lending towards businesses to make them less stringent and make lending towards housing more stringent, you know that's going to force banks to direct lending more towards the business sector."
Mr Gibbs says it is up to the bank to decide how to distribute lending within the business sector or housing based on its own credit criteria.
He says housing is the only issue that is stopping the Reserve Bank from easing its stance and the bank should be setting policy based on how the economy is performing as a whole.
"I think certainly in the business sector we could easily accommodate lower interest rates and if we need to do something around housing to make that possible - then so be it."
