May 11, 2016 5:06:33 PM

Reining in a rampant housing market

Topics: Finance Update 0

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The Reserve Bank of New Zealand is scheduled to release its six-monthly Financial Stability Report later this month, amidst speculation that the report will include new initiatives to combat the overheated property market. And who's better with money - kiwi men or kiwi women? We take a closer look at recent research to uncover the answer in this month’s finance article.

Possible changes to macro-prudential tools

Commenting on the Financial Stability Report due to be released later this month, senior economist for ASB, Jane Turner, said that house price inflation isn’t the key concern. Rather it’s the lift in prices relative to incomes that is the greater concern.

 

The second issue is the prevalence of investors, who are more likely to default should a negative shock hit the economy, said Turner, suggesting that a tightening of macro-prudential tools would clear the path for further interest rate cuts this year.

 

"With tentative evidence suggesting that the Auckland investor LVR restrictions have merely pushed Auckland investors further afield, the RBNZ may want to broaden the restrictions to the rest of the country."

 

ANZ economists believe that the RBNZ will need to implement further macro-prudential tools, like requiring banks to hold more capital, strengthening the current loan-to-value (LVR) restrictions on mortgage lending, or introducing new restrictions on mortgage lending such as a maximum debt-servicing-to-income ratio.

 

"We don’t have any specific expectations, but it would be easy for the RBNZ to broaden the Auckland investor LVR restriction to apply across the country. It also has the ability to increase risk weights on specific sectoral lending. Other options would be restrictions to interest-only lending and debt-to-income or debt servicing restrictions," they said.

 

While it’s unlikely the RBNZ will commit to any of these options as early as this month, it’s expected it will announce some form of macro-prudential tightening before the year is out.

 

Who's better with money - kiwi men or women?

It’s a popular belief that women are more likely to rack up a hefty credit card bill, while men are prepared to take more risks when it comes to money. So just who is better with money? The Herald recently embarked on a research project to uncover exactly this, and the results were quite interesting.

 

The study revealed that Kiwi men are more likely to have a credit card with a balance of over $10,000, less likely to have a savings account, and more likely to have a personal loan than women. Data supplied by ANZ showed that fewer men were likely to have savings accounts, but those that did tended to have higher balances than women.

 

When it comes to credit history, men are the clear winners. Data supplied by credit agency Dun & Bradstreet shows that women have a lower average credit rating and were more likely to default multiple times. Women were also more likely to take at least six months longer to pay off their student loan than men.

 

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