tag:blogger.com,1999:blog-7560636882691523439.post4735636081326539737..comments2024-03-21T20:29:29.030+13:00Comments on Life Behind the <u>IR</u>on <u>D</u>rape: Question for the Film Classification Unit. And Bank Lending.Mark Hubbardhttp://www.blogger.com/profile/02541153163041831880noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7560636882691523439.post-8308524011132015402014-03-06T08:21:03.107+13:002014-03-06T08:21:03.107+13:00I mostly listen to RNZ (or BBC) so if that item co...I mostly listen to RNZ (or BBC) so if that item comes up as a podcast, I'll put a link up ... I suspect it would've been up by now though.<br /><br />Can't dispute your logic on this one. The salient point would be if banks want to lend more money to low depositers, then they have to increase overall lending (regardless of effects of that on indebtness).Mark Hubbardhttps://www.blogger.com/profile/02541153163041831880noreply@blogger.comtag:blogger.com,1999:blog-7560636882691523439.post-72247361323674267142014-03-06T02:17:24.369+13:002014-03-06T02:17:24.369+13:00I would be interested to check this out and RNZ is...I would be interested to check this out and RNZ is usually fairly reasonable in its commentary.<br /><br />What I expect is that the conclusion (net higher indebtedness) does not follow from the premise (LVR restrictions, with banks needing to lend more to create more high LVR loans). <br /><br />In order to think about this logically you must look at this while hypothesizing the same borrowers who come through the front doors of ANZ in either case. If we assume ANZ thinks they are all a reasonable credit risk, and wants to lend to all of them, then having an LVR restriction which prevents lending to some of them (who want high LVR loans) then it must follow that the LVR restrictions reduce net indebtedness in the aggregate.<br /><br />Unless there is a mechanism where by the LVR restrictions change (and increase) the number or volume of low LVR loans coming through the door then this can't increase the aggregate indebtedness. To conclude that the incentive for ANZ to expand their book changes anything is to assume that they would not want to expand their book anyway (which they clearly would).<br /><br />Its also fairly clear that the LVR ratios are working against a housing market bubble and if anything this reduces the volume of borrowers walking into ANZ. This would be because with less credit expansion in the housing market the housing price inflation rate slows, which dis-incentivises further participation in the speculative game of flipping houses to each other in the hope that their price goes up (and lending to support this expands) between flips.<br />Nic the NZerhttps://www.blogger.com/profile/03375388456334279479noreply@blogger.comtag:blogger.com,1999:blog-7560636882691523439.post-56677007756216787012014-03-05T07:44:15.835+13:002014-03-05T07:44:15.835+13:00All I know Nic is the report I heard on RNZ which,...All I know Nic is the report I heard on RNZ which, going over the ANZ result specifically brought up the notion as I've written it. Growing their overall book was the only way the bank could still increase the low deposit borrowers, so a Central Bank policy brought in to 'control' the housing marking and household debt will be adding to the latter and probably doing little to manage the former. I've looked for the item on RNZ but its not a podcast (yet, at least).Mark Hubbardhttps://www.blogger.com/profile/02541153163041831880noreply@blogger.comtag:blogger.com,1999:blog-7560636882691523439.post-73693877171014608492014-03-04T23:52:47.252+13:002014-03-04T23:52:47.252+13:00I certainly agree with the new use of factual anal...I certainly agree with the new use of factual analysis (observed since new year), its certainly worthy of a approval. <br /><br />Not quite so sure that the facts agree with your case here though.<br /><br />One would have assumed that ANZ's lending was all mutually agreed between them and their borrowers?<br /><br />Also household net indebtedness has been going up for quite a long time, well before the LVR restrictions were imposed. What makes you think the LVR restrictions are causing something which was happening without them?<br /><br />http://www.rbnz.govt.nz/statistics/key_graphs/household_debt/<br /><br />If you are concerned about net-indebtedness I think that the LVR policy is a good one promoting stability in the longer term, but its not a magic lever which immediately gives control over the level of indebtedness (in fact if it did we might call the policy autocratic).<br />Nic the NZerhttps://www.blogger.com/profile/03375388456334279479noreply@blogger.com