The Reserve Bank of New Zealand (RBNZ) has seemingly been on a quest to ‘bring down’ the property market over recent years, in conjunction with our previous government. The Credit Contracts and Consumer Finance Act (CCCFA), higher taxes for property investors, increased interest rates, and stricter deposit requirements via Loan-to-Value Ratio (LVR) restrictions have all played a role in cooling the property market from 2021 onwards.
Already, the central bank influences the interest rates we pay, the amount of deposit we need, and soon, through Debt-to-Income ratios (DTIs), the amount of income required to become eligible to borrow money.
You can believe that the possession of power is not the same as wielding it, or you can believe that those with power will eventually use it. In a country where only a few major banks own pretty much the entire industry, I often wonder what more banking consolidation could look like.
I also wonder this: How did we grant so much authority to the unelected centralized entity in charge of our money – the Reserve Bank of New Zealand?
On the topic of the RBNZ, Recent weeks have seen the rollout of a new communication program regarding digital cash, or Central Bank Digital Currencies (CBDCs). Programmable money has the potential to usher in a new wave of digital transformation within traditional finance, and will also no doubt allow for more precise monetary policy in real time, even at an individual user lever – will this power be wielded for its full potential? If so, we should be encourage to discuss what this looks like – both good and bad.
I spoke recently to John Bolton, founder of the mortgage brokerage firm Squirrel, and CEO of Squirrel, David Cunningham. Both David and John have been quite vocal regarding debt-to-income ratios and, previously, issues related to the CCCFA, and so that’s why I want to chat.
The cost and availability of bank credit is the single biggest driver of house prices. So if you’re a property investor, or you’re an owner looking to sell over the next 5-6 years especially, I really believe a deeper understanding around potential digital transformation pathways is critical.
