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  1. #1
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    Default Risky Lending / Interest rates

    I am incandescent with rage at the clowns at the Reserve Bank and their total inaction on inflation and interest rates.
    And now we here from deputy governor that "risky lending" has been going on.
    Risky lending!
    We are told by the Reserve Bank that they have allowed "risky lending", and now we all have to be held to ransom by it.
    Who is doing the "risky lending"? Why are they doing the "risky lending"? Why are they being allowed to do "risky lending"? How prices are shooting into the stratosphere, and some of this is being supported by "risky lending"(?) The authorities are failing in their most basic duties.

    The Reserve Bank is also saying they are worried about price falls due to "negative equity". Please let the market function! Please let people bear the responsibility for their own investment decisions! Please let people have a chance at entering the housing market without being forced to bear constantly skyrocketimng prices when the market is trying to correct!

    I don't want to be paying $100 for a hamburger just because this Reserve Bank turns a blind eye to inflation. They have a responsibility to all - not least of all renters who are getting screwed over and ordinary everyday workers who are getting screwed over. Stop throwing all your weight behind those who don't want to take responsibility for their own investment decisions; it is fundamentally unfair!!

    https://www.stuff.co.nz/business/125...own-on-housing

    Reserve Bank prepares to crack down on housing
    Tom Pullar-Strecker
    09:41, Aug 03 2021


    The Reserve Bank has proposed reducing the amount of low-deposit lending banks can do for mortgages.

    Consultations will start with banks later this month, with a view to introducing in October a tighter loan-to-value restriction. It would allow only 10 per cent of new owner-occupier housing loans to be to borrowers with a 20 per cent deposit or less, instead of the current 20 per cent of lending.

    It will also consult in October on implementing debt-to-income (DTI) restrictions and/or “interest rate floors” to prevent house buyers getting over their heads with debt.

    The decisions follow the Reserve Bank signing an updated ‘memorandum of understanding’ with Finance Minister Grant Robertson.

    ANZ chief economist Sharon Zollner said the measures could reduce the pressure on the Reserve Bank to raise interest rates.

    “Macro-prudential tightening means less monetary tightening is required.”

    Reserve Bank deputy governor Geoff Bascand said the bank was focussed on ensuring borrowers were “resilient to a range of future economic and financial conditions”.

    “We are particularly concerned about those who have borrowed in the past 12 months at high LVRs and high DTIs,”
    he said.

    “If house prices were to fall, some buyers could face the possibility of negative equity – which means the value of their property is below the outstanding balance on their mortgage.”

    Bascand said the steps the Reserve Bank had taken to date had only partially reduced that risk.

    “We haven’t seen a sufficient reduction in risky lending,” he said.

    Robertson said the updated memorandum would ensure the Reserve Bank had the flexibility it needed.

    “I have largely agreed to the Treasury and Reserve Bank’s proposed update to the memorandum to add debt serviceability tools, but as I indicated in June this extension should not unduly impact first home buyers,” he said.

    He is believed to have concerns that controlling the amount of debt house-buyers can take on relative to their income could disadvantage younger buyers.

    “We want to make sure we don't price first home buyers out of the market,” he said.

    Robertson indicated he had insisted on “further wording” in the memorandum that states the bank “must have regard to avoiding negative impacts, as much as possible, on first home buyers” to the extent that was consistent with the bank’s purpose and functions.

    “I believe this agreed wording will set clear public expectations while maintaining the operational independence of the Reserve Bank. It is still up to the Reserve Bank how it chooses to introduce any restrictions, having had regard to this condition,” he said.

    Any decision to introduce DTIs would only happen after a “full public consultation” and a regulatory impact assessment, which would take a minimum of three months, he said.

    That suggests DTI restrictions could not be introduced until the start of next year.

    Economist Shamubeel Eaqub said it was “about time” for the proposed new controls.

    “The only thing we can rely on is looking at what happens when you choke the supply of credit,” he said.

    “What we saw in previous episodes is when the Reserve Bank chokes the amount of credit that is available it reduces the amount of competition because fewer people can get approved for mortgages and hence fewer people can buy.”

    Interest rate floors would be sensible, Eaqub said.

    “What they’re saying is actually sometimes we might want to have lower interest rates for the functioning of the wholesale market, but we don’t necessarily want that rate for mortgages.”

    Interest rates were a fairly blunt tool, and the question was how to use them to manage disparate parts of the economy, “especially housing which seems to go up no matter what you do”.

    “We have to still provide stimulus for the wider economy – look around the world now, delta is running rampant, there is real risk that the global economy is going to take a hit,” Eaqub said.

    “There’s real risk there will be disruption to trade; is this the right time to raise interest rates because house prices have gone up?”

    He said all the macro-prudential tools being worked out would allow the Reserve Bank to create some “separation” between the official cash rate and the incentives for people to buy and sell houses.

    Reserve Bank governor Adrian Orr acknowledged that “one of these reasons” house prices were high was low interest rates.

    “We had to significantly lower the official cash rate to best meet our monetary policy mandate of maintaining low and stable inflation, and contributing to maximum sustainable employment,” he said.

    “This is why the current level of interest rates are historically low now. This is also why the current level of interest rates is not indicative of where they will be on average through time – or at least over the life of a mortgage.”

    The Reserve Bank’s monetary policy committee would need to think about “when and how we would return interest rates to more normal levels” and its next opportunity to do that was when it released its next monetary policy statement on August 18, Orr said.

    The comment could be interpreted as suggesting the Reserve Bank is not yet completely sold on OCR hikes, and – as Zollner indicated – saw mortgage controls as something of an alternative.

    National Party shadow treasurer Andrew Bayly said the Government was tinkering with monetary and financial stability policy but that would do nothing to address rampant house price inflation.

    “The Government’s real focus should be on removing the barriers to building new houses,” he said.

    “As the Reserve Bank governor himself said before being corralled by the Minister of Finance, the real challenge with the housing market is a lack of supply and the factors preventing building, such as access to the land and planning rules.”

  2. #2
    Senior Member TeslaGod's Avatar
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    I think you worry to much.

    History shows deflation follows a major pandemic.

    You have it confused with war, inflation follows war.

    And quoting the socialist STUFF media publication on a capitalist trader forum doesn't help.
    Last edited by TeslaGod; 03-08-2021 at 06:31 PM.

  3. #3
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    Default

    Quote Originally Posted by TeslaGod View Post
    I think you worry to much.

    History shows deflation follows a major pandemic.

    You have it confused with war, inflation follows war.

    And quoting the socialist STUFF media publication on a capitalist trader forum doesn't help.
    What an odd response from you.

    Quoting "the socialist STUFF media publication"? The quotes in the article are from the Reserve Bank deputy governor. He states that there has been risky lending going on. What an extraordinary admission. 'Subprime' has been going on in NZ, and now we have the proof.

  4. #4
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    Default

    Quote Originally Posted by TeslaGod View Post
    I think you worry to much.

    History shows deflation follows a major pandemic.

    You have it confused with war, inflation follows war.

    And quoting the socialist STUFF media publication on a capitalist trader forum doesn't help.
    Not much "deflation " going on at the moment .....
    https://www.cnbc.com/2021/07/16/new-...-a-decade.html

  5. #5
    Senior Member TeslaGod's Avatar
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    "Subprime" It's New Zealand ... not The Big Short ,I doubt there is going to be mortgagee sales,I mean we're are we going live?

  6. #6
    Senior Member TeslaGod's Avatar
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    Quote Originally Posted by stoploss View Post
    Not much "deflation " going on at the moment .....
    https://www.cnbc.com/2021/07/16/new-...-a-decade.html
    It's going to pass.

    And considering this is a trader forum, inflation is good for shares..so why all the complaining?

  7. #7
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    Quote Originally Posted by TeslaGod View Post
    It's going to pass.

    And considering this is a trader forum, inflation is good for shares..so why all the complaining?
    I wasn't complaining , just pointing out that your comment "deflation follows a major pandemic" is looking wrong as evidenced by the latest CPI numbers .

  8. #8
    Senior Member TeslaGod's Avatar
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    Quote Originally Posted by stoploss View Post
    I wasn't complaining , just pointing out that your comment "deflation follows a major pandemic" is looking wrong as evidenced by the latest CPI numbers .
    Inflation will begin to slow by the end of the year or early 2022, As in past historical pandemics deflation follows for the following 20 years.

  9. #9
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    Such complacency in the responses. Either being dismissive or posting red herrings seems to be the way to go. It wasn't STUFF making the comments on risky lending, it was the second in command at the Reserve Bank.

    I also have to laugh at the comments about so-called 'capitalism'. Under capitalism saving is supposed to the be the engine-room, the driver fueling investment & growth. This joke zombiefied system that we have had foisted on us since the GFC is just about constant interest rate suppression and state money printing, and savers can go to hell.

    The definition of 'capitalism' in NZ seems to be 'a bunch of good buggers reaping huge capital gains off the housing market', and 'socialism' is 'a bunch of bludgers sitting on the benefit - no wonder they can't get ahead'.

    Now we have a Reserve Bank who are supposed to be keeping inflation within a set band, and now it pops up to 3.3% suddenly the government hands them additional tools to 'deal with housing', and we have government ministers such as Stuart Nash talking about "loooking through" inflation.
    Translation: the so-called 'independent' Reserve Bank will ignore their inflation mandate (hand in glove with the government) and again favour housing asset owners over everyone else.
    But now they are trying to get a camel through the eye of a needle: they need to keep house prices rising moderately, while decreasing the pool of buyers, while checking inflation, while dealing with a rent crisis, while meeting the aspirations of young first home buyers. In other words, they need to do the impossible.
    Last edited by Logen Ninefingers; 04-08-2021 at 08:11 AM.

  10. #10
    Senior Member TeslaGod's Avatar
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    @Logan Nine fingers.

    This is share trader forum

    You know, Shares in multi billion dollar companies.
    Debt, investment,risk , interest rates,margin, freemarket ,greed and all the things that capitalism is.

    Interest.co.nz and the comments section of stuff media is the ideal place for your ideology.

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