The Reserve Bank will put a limit on how much banks can lend on low-deposit, high value mortgages - rather than restricting them altogether, if new rules come into force.
The bank has issued its response to submissions on one of four tools it has in place to counter surging credit growth and house prices and ensure financial stability.
The bank said the rules will take a 'speed limit' approach which will still allow many borrowers with low deposits to continue to obtain mortgages.
An example of that might mean banks could have no more than 15% of new lending on loans of more than 80% of a property's value.
The bank said the rule can help dampen excessive house price growth during times when credit growth is boosting demand beyond supply and can reduce the risk of a rapid correction in house prices and the economic instability that would cause.
There will be exemptions for bridging, refinancing, and high LVR loans to borrowers moving home but not increasing their loan amounts.
And the Reserve Bank renewed warnings to banks to follow the spirit not just the letter of the restrictions and not to engage in innovative policies to avoid them.
There will be two weeks notice before any rules come into force.
