The Reserve Bank of New Zealand (RBNZ) will re-impose mortgage lending restrictions and work with the government to rectify the crisis in the housing market, further strengthening the expectation that interest rate cuts to negative levels are unlikely.
The plan, also known as the loan-to-value ratio (LVR), will be implemented in March next year.
Earlier, reported that the New Zealand government had written a letter to the central bank, suggesting that it consider amending bank transactions to include house price stability as an important factor in monetary policy.
Governor Adrian Orr later said that the central bank would consider the government's proposal but would need to assess the impact of the changes on its objectives to maintain financial stability.
New Zealand bounced back from the recession sooner than expected, but house prices soared due to low-interest rates, prompting the government to seek central bank assistance to act to protect the housing market.
The kiwi dollar continued to trade stronger after jumping to its highest level since mid-2018, supported by rising expectations that the central bank would decline to implement negative rates after the market saw government proposals.
