First home buyers must be protected from ‘unintended consequences’ of DtI ratios

A Labour government would protect first home buyers from the ‘unintended consequences’ of debt to income ratios, says Labour’s Finance spokesperson Grant Robertson.

“If Bill English agrees to a debt to income ratio it’s an admission his Government has failed to offer any tangible solution to the housing crisis and is, yet again, handing over the big decisions to the Reserve Bank.

“Macroprudential tools such as debt to income ratios can often be far too blunt when applied in a blanket fashion. We saw that with loan to value ratios that were originally applied to all buyers in all regions at the same rate.

“It wasn’t until problems occurred in the regions and speculators filled the gap left by first home buyers that LVRs and ‘speed limits’ were adjusted.

“That can’t happen this time around. It has to be done right first time. Blanket debt to income ratios will cause havoc for first home buyers who won’t have the income to buy houses, especially in places like Auckland, Tauranga and Queenstown.

“Bill English has acknowledged that tools like debt to income ratios can have’ unintended consequences’. Surely locking first home buyers out of the market has to be one of these. If he agrees to the Reserve Bank’s request to bring in these ratios they should apply only to speculators.

“According to economists, spiralling home loan debt has been driven by investors. If the Government wants to use debt to income ratios they should limit them to the speculators and investors and give first home buyers a break.

“Blanket debt to income ratios will cause widespread damage and almost certainly have unintended consequences. Along with building more affordable homes through KiwiBuild, Labour would focus on cracking down on the speculators, not punishing first home buyers,” says Grant Robertson.