26 Jan 2013

New rules being developed for housing mortgages

10:12 am on 26 January 2013

Finance Minister Bill English says he will not ask the Reserve Bank to fast-track new rules for mortgages in an effort to slow the housing market and improve affordability.

Radio New Zealand's economics correspondent said the bank has been working on new rules that would take the steam out of the market if it shows signs of getting to the point of threatening the stability of the banking system if prices later crashed.

The new rules include raising the minimum deposit required for a home loan.

Mr English said the Government is focussing on increasing the supply of new housing and has no plans to ask the Reserve Bank to speed up its work.

Earlier this week, Mr English said the demand for houses was getting back to the level last seen in the mid 2000s house price boom.

Mortgage approvals for the first three weeks of 2013 were the highest in five years.

Mr English said where house prices go next will depend on how many houses come on to the market and how fast that happens.

He said the Reserve Bank also has the option of raising the official cash rate from the current low of 2.5% if it believes prices are getting out of control. The OCR was set at this level on 10 March, 2011.

Mr English said the Government expects to make a decision about the new rules by the middle of the year.