So how does it work and how will it affect you & house prices?

Although the RBNZ is wanting the main banks to implement these measures going forward, most already are. 

We have had a few applicants deferred just this week from ASB because the debt to income ratio is higher than 7. 

Total Debt / Your Households Total Income = x (in ASB's case, this needs to be lower than 7)

Here is an example..

First home buyers earn $65,000 and $72,000 per year. They want to take on mortgage debt of $800,000.

$800,000 / ($65,000 + $72,000) = 5.8 - so that should be approved assuming the rest of the application is fine. 

For First Home Buyers, it's quite an easy equation, another way to look at it is your total income x 7 is the max you can borrow. 

In the same example above this would mean ($65,000 + $72,000) x 7 = $959,000 max amount you can borrow, add your deposit on top and that's what you can buy for assuming that you have no other debt floating around. 

To us, that still seems pretty good and isn't really going to slow down any crazy house market...

However, this is just the tip of the iceberg - have a listen as we get into this conversation a bit more.

Questions? [email protected]