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The Government and Reserve Bank are butting heads over ways to protect first-home buyers while bringing the housing market under control.
The Reserve Bank sparked debate this month when it issued a consultation document suggesting it would impose restrictions on high loan to value ratio (LVR) mortgages. Commentators warned that could see first-home buyers shut out of the market, but Prime Minister John Key said there was no reason first-home buyers should have to miss out.
"I've made made my feelings on it well known and I think they're sympathetic to what I'm saying, but there are challenges.
"I understand all that but, in the end, I just think it's not as challenging as everybody says. I think where there's a will there's a way."
Key defined an agreement between Reserve Bank governor Graeme Wheeler and the Government as a "work in progress".
About a third of all buyers were first-timers and they were exactly the people housing market reforms were meant to help, he said.
If the proposal goes ahead, banks would have to maintain an average LVR of 80 per cent, but that does not prevent lending above that.
"I don't think that it's a tool that should be used to write a bunch of higher LVRs for rich people and lock out a whole lot of first-home buyers," Key said.
The Government was working with the Reserve Bank and trading banks to draft an implementation plan that would not leave first-home buyers in the cold.
The Reserve Bank is expected to make its decision by the middle of next month, with the new rules to be in place by later this year.
- Fairfax Media