Few first home buyer details in PM speech
First-home buyers are a priority and the Government is keen to see all New Zealanders have the opportunity to buy a house, Prime Minister John Key says.
In a speech today to Local Government New Zealand, he gave no details of any Government response if the Reserve Bank, as expected, imposes loan-to-value ratios (LVRs) on bank lending.
That would effectively ration mortgage borrowing by those with small deposits, including many first-time buyers.
Ministers have signalled that changes could include widening access to KiwiSaver contributions and subsidies, as well as boosting the government-guaranteed Welcome Home Loan scheme that is exempt from LVR calculations.
"I have made my thoughts clear - first-home buyers are a priority for the Government. That remains my view," Key said.
It was not in the interests of first-home buyers if rapidly increasing house prices forced the central bank to lift interest rates.
"Even with LVRs introduced, interest rates may ultimately rise anyway, but the intention with these loan-to-value ratios is to provide the Reserve Bank with other tools to dampen demand," he said.
Housing bubbles overseas, such as in the United States, had a negative impact on the economy and left many homeowners and banks exposed.
"So it's an issue that has to be taken seriously here," he said.
"If it is left unchecked, some buyers could find themselves substantially overexposed in an overvalued market, and we all know what happens if those values start to fall."
Key said the demand side of the equation was largely the responsibility of the independent Reserve Bank . "They will in the end have to make a decision."
Part of the mix for the Government was ensuring economic fundamentals were right, people could get a job and there was enough land supply.
Affordable interest rates were also part of the mix.
"So this is a debate about getting the balance right between ensuring people have the opportunity to buy a home and ensuring we don't have problems with the banking system, with all the negative economic impacts that would entail," he said.