OPINION DTI RULES
The RBNZ has announced their proposal to introduce debt-to-income (DTI) restrictions (also known as debt serviceability restrictions or DSRs) on home lending. Being in practice as chartered accountants specialising in property, GRA are in a good position to read sentiment around the proposed rules based on feedback and observation from clients.
At first glance, I thought the proposal wasn't too bad. But after thinking about it and talking to clients, the ramifications may well be worse than many initially thought. A lot of people are on the edge of their servicing ability, and DTIs can only make it harder for them.
PROPOSED RULES
Subject to feedback from the consultation process, the plan is to initially set banks’ DTI restrictions as follows:
• 20 per cent of residential property lending to owner-occupiers with a DTI ratio greater than six (ie the loan value can be more than six times the borrower's income).
• 20 per cent of residential property lending to investors with a
