Prime Minister John Key says the only alternative to restricting loans to home buyers with low deposits is higher interest rates for everyone.
From today, only 10 percent of the total value of each bank's mortgage lending will be allowed to go to buyers with a deposit of less than 20 percent. Banks risk losing their operating license if they don't comply with the Reserve Bank's new rules.
Mr Key says the new rules are a pill he'd rather not swallow.
"I accept that a lot of people would say, 'I don't terribly like that'. It's like taking medicine when you're not well. I accept that," he said on Firstline this morning.
"But this is the other alternative, and that is for every other homeowner in New Zealand – of which there's well over a million – for every business in New Zealand which employs… New Zealanders, interest rates go up faster."
The Opposition has called the new rules unfair on first-home buyers, and Labour leader David Cunliffe has called for them to be exempt from the new lending rules. The Reserve Bank considered an exemption, but said first-home buyers make up around 40 percent of all low-deposit borrowers, too large a group to exempt.
Mr Key says the Opposition's preferred fix for the housing crisis is to let interest rates rise.
"When Labour say scrap [the new lending policy], they're saying two things: one, [they] will get in the way of the independent monetary policy run by the Reserve Bank that's happened for decades now; and secondly, they are telling you they want you to pay more for your mortgage. That is exactly what they're saying.
"That is a legitimate thing for David Cunliffe to campaign on – he wants higher interest rates for New Zealanders. I want lower interest rates for New Zealanders."
Builders have reported a slowdown in inquiries since the Reserve Bank signalled the changes a couple of months ago. Master Builders' chief executive Warwick Quinn told 3 News last week that members were losing work as clients pulled out, suggesting around 15 percent of new homes were built for low-deposit buyers.
But Mr Key says house building won't be affected because the new rules still allow some low-deposit lending.
"It doesn't mean that you cannot get a loan above 80 percent of the value of the home. You can," he says.
"There's not even exceptions – the banks are free to write a percentage of their mortgages over 80 percent. It means they can't write as many as they used to in the past."
Mr Key also says the problem isn't that there aren't enough houses for people to live in, just that there are too many people wanting to buy, instead of rent.
"It's not that there won't be enough houses… [it's that] there won't be enough houses for people to buy."
The Government and Auckland Council have an agreement that 39,000 new homes will be consented for building in the next three years.
3 News
source: newshub archive
