40% deposit to go?

The RBNZ Governor delivered a speech today at the Northern Club in Auckland. The RBNZ has steered through some turbulent times. The global landscape has been scoured with the after affects of the GFC; negative interest rates, low inflation and record debt levels. NZ has grappled with challenges, including a 75 percent decline in diary prices(recovered partially) and booming housing market.


It must be pleasant to survey the landscape and see positive GDP growth(in contrast to other developed countries) and dampened house prices after a prolonged period of low interest rates. Even then we still have “…greater room for monetary policy manoeuvre than central banks in many advanced economies”.

Deposit requirements

“When LVR’s (restrictions) were introduced in October 2013, 21 percent of the stock of mortgage lending across the banking system was at LVRs of 80% or higher”

“As a result of the LVR restrictions the stock of highly leveraged loans across the banks’ mortgage portfolios is now 8%”

“LVRs are not expected to be a permanent measure and the conditions for their removal would be: signs that financial stability risks have eased; and a degree of confidence that these risks won’t worsen again when LVRs are removed.”

Why not ease the deposit requirements? 

Underlying drivers of demand remains strong: Population Growth, Low interest rates.

Supply still seems well short.

It seems higher interest rates, moderation in population growth and or an increase in the supply of housing could ease concerns. To a point of lifting LVR restrictions.