.png "RE Investar-Logo-MRI_Colour web 229x115px (1)"){kind=logo}
Property investors appear set to face new lending restrictions as the Reserve Bank moves to prevent them taking an increasing share of the market.On Thursday the Reserve Bank left the official cash rate on hold at 2.25 per cent, despite concerns about the ongoing strength of the kiwi dollar.
Governor Graeme Wheeler raised fresh concerns about rising house prices in Auckland and around the country, warning concerns about the stability of the financial system were rising as a result.
Wheeler gave further hints that new debt to income ratios could be imposed on borrowers, however he indicated that rules targeting investors could come first.
READ MORE:
* First home buyers will benefit from tougher investors lending rules - Canstar
* Interest rate call on a knife edge
* The Reserve Bank's job is not to keep people guessing
* NZ should look to Australian-style mortgage controls, broker says
"We've been doing a lot of analysis on loan to value ratios, and whether they should be modified in some way and perhaps connected to investor properties," Wheeler said.
While he expected to begin talks with Finance Minister Bill English about consultation on debt to income restrictions, Wheeler said the work being undertaken now was "quite analytical" and any rules would be some time away.
Deputy governor Grant Spencer said Reserve Bank data suggested investors may make up to 46 per cent of house sales in Auckland now, and around 40 per cent around the country.
"The fact that the share of sales and share of credit going to investor segment, I think that has been adding pressure," Spencer said, with signs that the proportion going to investors may be climbing.
"I think if the investor component was stable that would be less concerning but we have seen the share of investor sales increase, particularly in Auckland."
Ad Feedback
Thursday's decision had economists divided, with around half of economists surveyed on Friday expecting Wheeler to cut.
As a result, the kiwi dollar jumped on the news, hitting a 12 month high of just over US71c just after the decision.
ANZ said the latest statement from Wheeler was "slightly less dovish" than the previous one, meaning it suggested the Reserve Bank was less minded than it was in April to cut the OCR further.
While customers do not borrow at the rate of the OCR, it has a direct influence on the interest rates on mortgages and the returns on bank deposits.
On Friday, a survey by Bloomberg showed 13 of 15 economists predicting that if Wheeler did not cut on Thursday, he would cut at the next meeting in August.
ASB senior economist Jane Turner said financial stability concerns appeared to have convinced Wheeler not to cut rates, with the Reserve Bank noting rising house prices in Auckland "and other regions" were adding to concerns.
"The [Reserve Bank] may be stalling to allow time to introduce further macro-prudential tools," Turner said.
Ahead of the decision, ASB had expected the OCR to be cut today.
Westpac chief economist Dominick Stephens said he still expected the Reserve Bank to cut the OCR at its next review in August.
"Our overall conclusion was that the [Reserve Bank] is feeling less alarmed about low inflation than it was a couple of months ago, but that it still views another OCR cut as likely to be required," Stephens said.
Wheeler's comments appeared slightly more upbeat about the economy that in March, when he surprised the market by cutting the OCR by 25 basis points.
"Global financial market volatility has abated and the outlook for global growth appears to have stabilised after being revised down successively over recent quarters," Wheeler said in a statement.
"There has been a modest recovery in commodity prices in recent months. However, the global economy remains weak despite very stimulatory monetary policy and significant downside risks remain."
A forecast of short term interest rates provided by the Reserve Bank in its quarterly monetary policy statement still suggests the OCR will be cut to 2 per cent before Christmas.
Ahead of the decision, ASB and ANZ were predicting that the OCR will eventually be lowered to 1.75 per cent.
Wheeler's statement portrayed a two-speed economy.
"Domestic activity continues to be supported by strong net immigration, construction, tourism and accommodative monetary policy," he said.
"The dairy sector remains a moderating influence with export prices below break-even levels for most farmers."
.png?width=200&height=100&name=RE%20Investar-Logo-MRI_Colour%20web%20229x115px%20(1).png "RE Investar-Logo-MRI_Colour web 229x115px (1)"){kind=logo}