Serviceability restrictions as a potential macroprudential tool in New Zealand

Status: The Reserve Bank has published a consultation paper seeking feedback on the possibility of debt to income (DTI) or other similar serviceability restrictions being added to the toolkit set out in the Memorandum of Understanding on Macroprudential Policy.

8 June 2017

The bank released the consultation paper and is seeking feedback from stakeholders on topics such as:

  • the risks posed by high-DTI lending and the potential for a DTI limit or similar policy to mitigate them
  • alternative policies under the Reserve Bank’s control and how they would compare to a DTI limit
  • desirable design features for any DTI policy and the potential costs and benefits

The consultation paper outlines the Reserve Bank’s view on these issues. The Reserve Bank has said it would not implement a DTI policy in current market conditions, but that it considers it could be a useful option in the future. The consultation paper includes a cost-benefit analysis considering the potential  costs and benefits of implementing a DTI policy and finds there could be significant net benefits.