A group of financial organisations says new borrowing restrictions could see a rise in dodgy finance companies and loan sharks.
In a bid to cool the property market in Auckland, the Reserve Bank is considering rules that would limit how often banks could give mortgages to people with deposits less than 20%.
But the Financial Services Federation said that could force people to seek second mortgages - especially if they don't want to wait to buy in a rapidly rising market.
Executive director Lyn McMorran said they may be forced to turn to less reputable lenders who charge high interest rates which, in turn, could see an increase in the number of those lenders.
Ms McMorran said most mainstream financial institutions are very responsible about who they give low deposit mortgages to.
