A year on from the Reserve Bank imposing loan-to-value ratio (LVR) lending restrictions on banks, the banks are well below the 10% threshold at 6.6%.
However, proposed changes to assist KiwiSaver first-home buyers could potentially add to already stubborn house price pressures, a polarising issue affecting Government policy and the Reserve Bank's overall inflation strategy.
The Reserve Bank was concerned at the extent of bank loans to people with less than a 20% deposit in the wake of the global financial crisis, when plunging house values threatened the equity holding of both homeowners and banks.
The LVR was criticised for locking out first-home buyers, but a concession was quickly made by the Reserve Bank exempting new home builds from the minimum 20% deposit required under LVR restrictions.
In September last year, the proportion of loans held by banks stood at 25.1% of their portfolios, but when the LVR restrictions were imposed the following month, this almost halved to 12.8%, and slid to a low of 4.8% earlier this year.
ASB economist Christina Leung said since the high-LVR restrictions took effect,
banks' high-LVR lending had fallen sharply, and in August was steady at 6.5% of their portfolios.
''Banks continue to adjust to this new environment of lending, and we expect this proportion of mortgage lending will edge slightly higher as competition among banks heats up,'' Ms Leung said.
However, in an investment note this week, Milford Asset Management discussed potential post-election changes to KiwiSaver, saying they could be ''good news'' for aspiring first homeowners, but not necessarily in the overall interests of the KiwiSaver scheme.
Milford said National's pre-election pledge to provide $218 million of Government support over the next five years to first-home buyers in KiwiSaver via the HomeStart package could add to house price pressures.
''With the prospect of many KiwiSaver members being able to draw down virtually all of their savings to purchase property, we'll end up with more money continuing to flow into the property market, which in some centres could add to price pressures,'' Milford said.
Due to start in April next year, the HomeStart package will double grants for those qualifying for a new-build home, as opposed to an existing home.
''This is a significant leg-up for those looking to purchase a newly built first home,'' Milford said.
A KiwiSaver member of three years would get a $6000 grant, or $12,000 per couple; a four-year member $8000, or $16,000 per couple; and a five-year member $10,000, or $20,000 per couple.
Another proposed change by National is for those in KiwiSaver buying new or existing homes to have access to $521 of annual tax credits, an addition to their own and employers' contributions, but leaving just $1000 in the kick-start account.
Milford said there were two other ''more worrying outcomes'' from the depletion of KiwiSaver accounts: a loss of compounding returns over time, which would take years to rebuild; and that underfunded retirees not having more diversified funds on retirement ''will ultimately mean continued reliance on government-funded superannuation benefits''.
''That is not the intention of KiwiSaver,'' Milford said.
Ms Leung said she expected the proportion of new high-LVR lending would remain ''comfortably below 10% as a buffer against breaching the limit''.
House price inflation peaked late last year, and she expected further moderation in house price inflation over the coming year, as new housing supply became available and higher interest rates took effect.simon.hartley@odt.co.nz
