Restricting the size of a mortgage to a multiple of a homeowner's income proposed by Treasury would hinder, not help, the Auckland housing market the Property Institute says.

Ashley Church, chief executive of the institute, said debt-to-income mortgage restrictions could lead to an artificial boom in apartments and could cut first-home buyers even more greatly out of the market if they were introduced.

"The effect of such a policy would be to limit a typical Auckland family to a mortgage of less than $400,000," Church said, citing similar rules in the UK where most home buyers were restricted to 4.5 times their annual income.

The concept has been spurred by the release of Treasury documents, supporting the Reserve Bank's intervention in the Auckland housing market but suggesting alternatives to loan-to-value ratios (LVRs).

Under LVRs, most borrowers have to have a set percentage of the house's value as their deposit.

At present that hurdle is 20 per cent, but on November 1, it becomes 30 per cent for investors in Auckland, while restrictions loosen up for more low-deposit lenders outside Auckland.

Treasury said one of the unintended consequences of the LVRs was that it had shut many first home buyers out of the market.

"LVR limits target one aspect of loan sustainability, that is, credit loss given default."

Debt-to-income limits were an alternative way "of managing financial system vulnerability by targeting the likelihood of default."

Church said the Reserve Bank had previously confirmed it was collecting loan-to-income data from the banks, but debt-to-income mortgages would almost certainly make the Auckland housing crisis worse."

He said the fallout could include:

- Fuelling an artificial boom in apartment construction - caused by the fact that it was the only building most people could now afford.

- Putting up further barriers to first-home buyers.

- Prompting house listings to fall because home owners would choose to hang on to their properties rather than accept much lower prices for them.

- Stopping infill development, and possibly large scale development, because developers were also caught in the new restrictions.

The Reserve Bank on Thursday "left interest rates unchanged at 2.75 per cent, but said Auckland house price rises remain strong, "posing a financial stability risk".

Labour's housing spokesman Phil Twyford called on the Government to rule out debt-to-income mortgages.

"Such measures in England and Ireland have curbed skyrocketing housing prices but they have come at a price - they've locked first home buyers further and further out of the market.

"With the median Auckland house price of $771,00 already nearly the equivalent of 10 times the median household income, few people will be able to buy into the market."