New LVR ratio restrictions

Norman Gemmell | Victoria University of Wellington | 02 October 2013

The introduction of the new loan-to-value ratio (LVR) restrictions by the Reserve Bank of New Zealand (RBNZ) this week has received much media commentary - both for and against.

The idea (as with other monetary policy instruments such as interest rate rises), is to limit demand for house purchase to help stop unsustainable rises in house prices. As the recent Global Financial Crisis revealed, especially in the United States, when house prices take a downward slump...