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Reflections on a decade of using macroprudential policy

This Bulletin article looks at New Zealand's use of macroprudential policies over the past decade to mitigate housing-related risks.

Chris McDonald and Shaun Markham


This article was produced for a study group set up by the Bank for International Settlements (BIS) to reflect on the lessons from the use of macroprudential policies over the past decade to mitigate housing-related risks. This article on the New Zealand experience was produced alongside case studies for other jurisdictions and an overall summary, which are available on the BIS website

A key macroprudential tool to address housing-related risks to the New Zealand financial system has been loan-to-value ratio (LVR) restrictions on new mortgage lending (also known as loan-to-value or LTV restrictions in other countries). We first introduced LVR restrictions back in 2013. They have been adjusted through time to reflect the degree of risk that new lending flows present to the financial system. Our assessment is that LVR restrictions have successfully added to household and lender resilience.

The structure and content of this article were set out to make comparisons between jurisdictions easier. As such, this article covers:

  • the importance of housing-related risk for the New Zealand financial system
  • the objectives of macroprudential policy including to address these risks
  • practical aspects of implementing and calibrating LVR restrictions
  • measures of success, and
  • how we have mitigated some of the unintended consequences.

We have also included a box that was not part of the BIS work, focusing on our experience with macroprudential policy during the COVID-19 pandemic. One thing this period highlighted again was the value of having a tool available to contain debt servicing risks. Reflecting this, we have recently published a framework for a debt-to-income (DTI) tool and banks are preparing their systems to be operationally ready for a DTI restriction from April 2024.

More information

Debt serviceability restrictions consultation

Loan-to-value ratio restrictions