RBA unlikely to follow Reserve Bank of New Zealand on home loan lending restrictions

Australia is not set get any cap on loan-to-value ratios (LVRs) under the RBA governorship of Glenn Stevens.

Indeed the RBA has actually cautioned against a cap on loan-to-valuation ratios (LVRs) for mortgages, which could be varied from time to time, as has been adopted in some countries including New Zealand from October this year.

Its the bank view that a cap would have little impact on buyers trading up, but squeeze first-home buyers out of the market.

Australia already has a prudential framework requiring higher risk weights on high LVR loans.

Practically speaking the presence of non-bank lenders which are not subject to restrictions imposed by the RBA or APRA would mean that high loan to value mortgages would still be available in any event.

Last year Luci Ellis, head of the RBA’s Financial Stability Department, stressed borrowers needed to provide some deposit when they buy a home.

"It protects them if something goes wrong for them, like a job loss or illness, especially if it happens at the same time that housing prices are falling,” Ellis said.

Banks typically require a minimum deposit of between 5% and 10% - and even 20%.