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Ahead of Wednesday’s the Reserve Bank of New Zealand’s (RBNZ) Financial Stability Report, the Australia and New Zealand Banking Group (ANZ) anticipates no change in the Loan to Value Ratio (LVR).

Key quotes

“The RBNZ has recently conducted its regular health check of the New Zealand financial system. The test results, diagnosis and prescription will be announced in this week’s Financial Stability Report (9am Wednesday).”

“We expect the risks to financial stability from high household sector debt to again feature. And given that the pulse of the housing market has recently picked up, we think the balance of risks has shifted towards the RBNZ keeping LVR restrictions unchanged for now.”

“But it’s still a close call. Like us, we think the RBNZ will be cognisant of the possibility that house prices could take off strongly again, which would not be ideal from a financial stability perspective (among others!).”

“Dairy sector debt and international risks should also feature heavily. The former appears to be on an improving trajectory; the latter are little changed since May.”