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Speaker 1: Amazing how the Reserve Bank views the world once adary

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Speaker 1: and leaves the building, isn't it. We've got changes to

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Speaker 1: the loan to value ratio LBRs. Essentially the retail banks

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Speaker 1: will be able to lean more money to people with

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Speaker 1: low deposits. So does it far up the housing market?

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Speaker 1: David Cunningham, as the CEO of Squirrel Mortgage Mortgages back

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Speaker 1: with us.

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Speaker 2: Good morning, Good morning mine.

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Speaker 1: Are we on the right track here?

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Speaker 2: We are? For once? I'm quite complimentary of the Reserve

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Speaker 2: Bank on the changes here. They've got a good toolkit

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Speaker 2: and they're using it wisely. So yeah, this is a

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Speaker 2: really good move and the background paper that they've done

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Speaker 2: on it is sadly presented and based on good research

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Speaker 2: and good thinking. So congratulations to the Reserve Bank for

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Speaker 2: a change.

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Speaker 1: Is it debatable that we ever needed to be as

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Speaker 1: restricted as we have been with.

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Speaker 2: The toolkit that the Reserve Bank had before with loan

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Speaker 2: to value ratios, it lacked one thing and that was

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Speaker 2: that when enterprices property prices went up, it basically enabled

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Speaker 2: banks to lend more. So property prices will go at more,

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Speaker 2: which enabled banks to lend more and so on, and

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Speaker 2: so what the debt to income ratios, which in a

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Speaker 2: bit over a year ago have done is set some

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Speaker 2: guardrails around that that says, hey, it's this thing called

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Speaker 2: income and how much you're borrowing. And so those two

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Speaker 2: together work far more effectively because there's a natural guardrail

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Speaker 2: from the debt to income ratios, which which sort of

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Speaker 2: the Reserve Bank calls this pro psychicality. The more you lend,

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Speaker 2: your more you can lend sort of things. So yeah,

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Speaker 2: I think it's sort of good outcome, and it's enabled

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Speaker 2: the Reserve Bend to ease the loan to valuatio restrictions,

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Speaker 2: not that they were really applying because the economy has been.

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Speaker 1: Dead were well, that was my next question. Where's the

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Speaker 1: demand bit at? I mean, is there a demand? If

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Speaker 1: you had more money, will people take it up?

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Speaker 2: Look, there's been no constraint for ages. Now. You know,

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Speaker 2: we've been in recession for the best part of two years,

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Speaker 2: so you know, the housing market has been falling in

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Speaker 2: price for a long period and then stable for the

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Speaker 2: last year. So the demand's not there today. This is

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Speaker 2: very much a long term change to the toolkit and

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Speaker 2: how it will be applied. It's positive, definitely. First home

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Speaker 2: bars because the speed limit, as it's called, so the

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Speaker 2: amount of lending banks can do above that LVR level

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Speaker 2: that the Reserve Bank sets, which is eighty percent for

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Speaker 2: homeowners and seventy percent which is slightly raised for investors.

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Speaker 2: So they've raised that amount that can be done from

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Speaker 2: twenty to twenty five percent for the homeowners and from

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Speaker 2: five to ten percent. Now that's a speed limit. Banks

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Speaker 2: will always operate under that speed limit. So when the

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Speaker 2: speed limit will say twenty percent for home buyers, they

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Speaker 2: operate at fifteen. So it's not like, you know, you

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Speaker 2: get to part get a speeding ticket and well whatever,

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Speaker 2: I'll pay it. You can't do that as a bank.

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Speaker 2: They never want to pass that because the Reserve Bank will.

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Speaker 1: Come down on them hard, all right, David appreciated. David Cunningham,

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Speaker 1: CEO of Squirrel Mortgages, with us this morning. For more

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