Reserve Bank of New Zealand FSR - financial system is sound, vulnerabilities remain
RBNZ Financial Stability report published 05 May 2021
Headlines via Reuters in summary:
- financial system sound, but vulnerabilities remain
- seeing the impact of low global interest rates resulting in increased risk-taking and higher asset prices
- high proportion of new lending has had high debt-to-income and loan-to-value ratios (LVR).
- new capital rules will start being implemented from 1 October 2021
- we will be watching how market conditions respond to the government's recent policy changes
- recent borrowers more vulnerable to rise in mortgage rates, exposes households and financial system to decline in house prices
- key New Zealand export prices have also been resilient, with dairy prices at their highest level in several years
- increases in minimum requirements will start in July 2022
- if required, prepared to further tighten lending conditions for housing using LVR requirements or additional tools
- recent tightening in LVR requirements will help mitigate some housing risks & support sustainable house prices
- pandemic has had limited impact on financial system soundness, but further resilience is needed
- banks are in a strong position to keep supporting their customers and the economy
I bolded a few of those points above. Note particularly "additional tools" could be used - these of course could (but not necessarily) include interest rate rises.