ENP Newswire -
Release date- 14052014 -
'Debt in the household sector remains high relative to income, and house prices are overvalued on several measures. As a result, financial stability could deteriorate if there is a sharp correction in house prices, particularly if accompanied by a reduction in debt repayment capacity.'
'Debt is also elevated in the dairy sector, although incomes are currently strong. A reduction in dairy export prices, and any associated fall in land prices, could place pressure on the more highly leveraged borrowers in this sector.'
'The restriction of high-LVR mortgages appears to be having the desired effect of moderating house price pressures and reducing the risk of a severe market correction. House sales and mortgage credit growth have reduced and we estimate that house price inflation could have been 2.5 percent higher in the absence of the restriction.'
'However, we will need to be confident that immigration pressures will not cause a resurgence of house price inflation. We consider that the earliest date for beginning to remove the LVR restrictions is likely to be late in the year.'
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