Reserve Bank of New Zealand Governor Orr is speaking to a parliamentary committee
"LVR" is Loan-to-Value Ratio
- in a nutshell its the amount borrowed as a % of the price of the property
Imposing a lower LVR means less leverage and thus a reduction in leverage risk, and thus a reduction in financial stability risks when applied across an economy (this is simplified). LVR rules are referred to as part of 'macro prudential' rules. Another way of discouraging borrowing (and leverage risk) is if a central bank jacks up interest rates, macro-prudential tools are often used instead of rate moves (Again, this is simplified but hopefully you get a picture of the theoretical transmission process at least). So, Orr saying he'll use the LVR to help stabilise risk makes rates hikes, at the margin, less likely.
