(Updates throughout)
WELLINGTON, Aug 2 (Reuters) - Reserve Bank of New Zealand Deputy Governor Grant Spencer said in a speech the central bank thinks it is appropriate to have limits to debt to income (DTI) loans in its toolkit but would not use them while the housing market is cooling.
The central bank has called for the DTI restrictions to be included in its macroprudential arsenal so that it is ready if the housing market picked up again sharply.
It has been seeking feedback from the public on these restrictions through a consultation paper, and stakeholders have until Aug. 18 to give their feedback.
"High volumes of high-DTI lending can contribute to a build-up of risk across the financial system which individual banks may not take fully into account," Spencer said in a speech published on the central bank's website on Wednesday.
"This is why the IMF (International Monetary Fund) and the Reserve Bank believe it is appropriate to have this tool in the macro-prudential toolkit, even though we would not wish to use it while the Auckland and national housing markets continue to moderate."
The central bank has expressed concern about any resurgence in house prices in recent months. House prices were growing at double-digit rates at the start of the year, particularly in the commercial capital Auckland, but have cooled since the central bank ramped up restrictions on loan-to-value loans last year. Data released on Wednesday showed house prices growing at the slowest in 2.5 years at 6.4 percent.
While macroprudential policies can help reduce house-related risk in the banking system, they cannot control house price inflation, Spencer added.
"These broad macro-prudential framework issues will be jointly examined next year by the Reserve Bank and Treasury when the Bank’s Memorandum of Understanding with the Minister of Finance comes up for review," he added.
