Capturing loan-to-value data in New Zealand – challenges and opportunities
Like many countries, New Zealand experienced rapid increases in both house prices and household debt in the decade leading up to the Global Financial Crisis. While house prices fell modestly during the recession of 2009/10, they remained elevated relative to fundamental metrics such as rents or incomes. By 2013, house prices were rising rapidly again in some parts of the country, particularly Auckland and Canterbury, reflecting both stronger demand and housing shortages. Although the rise in house prices was accompanied by only moderate growth in total household credit, lending undertaken at high loan-to-value ratios (LVRs in excess of 80 percent) had risen to nearly a third of all new housing loan commitments.
An A to Z of loan-to-value ratio (LVR) restrictions
The Reserve Bank recently announced restrictions on high loan-to-value ratio (LVR) lending. The restrictions take the form of a ‘speed limit’ that requires banks to restrict new residential mortgage lending at LVRs of over 80 percent to no more than 10 percent of the dollar value of their new residential mortgage lending. The speed limit on high-LVR lending is designed to slow the growth in house prices and housing credit, and mitigate associated risks to the financial system and the broader economy. This article sets out the framework for LVR restrictions, and explores the Reserve Bank’s early experience in operating them.
Coordination Behavior and Optimal Committee Size
How many members should committees consist of? This paper addresses this question in view of imperfect information and coordination behavior among the members, which is a new approach alternative to introducing information acquisition cost. First, using a simple model, I show that the existence of the coordination motive dismisses Condorcet fs (1785) suggestion and the finite optimal size of the committee is determined. Second, I provide an application of the mechanism to monetary policy committees in a basic New Keynesian model. This example will inspire other applications to policy issues in the dynamic stochastic general equilibrium framework.