4. Reserve Bank—Debt-to-income Ratio RestrictionsPHIL TWYFORD (Labour—Te Atatū) to the Minister of FinanceReserve Bank—Debt-to-income Ratio Restrictions4. PHIL TWYFORD (Labour—Te Atatū) to the Minister of Finance: Does he support the Reserve Bank introducing debt-to-income ratio restrictions for mortgage lending; if so why?Hon BILL ENGLISH (Minister of Finance): The Government is presently considering a request from the Reserve Bank to add a debt-to-income tool to the bank's macro-prudential toolbox. No decision has been made yet but I would point out to the member that in the last few days the Reserve Bank Governor has said that if the tool was available at the moment he would not be implementing it at the moment.Phil Twyford: How has he allowed the housing market to deteriorate to the point where a third of new mortgages are now over six times the family income?Hon BILL ENGLISH: The level of those mortgages is a decision made between the borrower and the bank. They decide between them how much risk they are willing to take and one of the things that will be driving the borrowers' considerations is that interest rates are half what they were when Labour left office. That is one of the reasons why there is strong demand for housing. Another reason is that those households have confidence in the economy they can see that their jobs could yield pay rises consistently over time and they back themselves to be able to meet the mortgage commitments. I do not think the Government is in a better position to make that decision.Phil Twyford: Is he concerned that with the average mortgage for a first-home buyer now at $390000 a 1 percent rise in interest rates would add four grand a year to interest payments crippling many hard-working families?Hon BILL ENGLISH: The member refers to these hard-working families as if they somehow lack the capacity to understand what they are doing and I disagree with him. I have spoken to many hard-working families who understand that interest rates could go up. Their banks actually run their tests on the mortgage as if interest rates are 6 or 7 percent—that is 1.5 percent higher than they currently are. So we believe these are mature sensible people—hard-working people—who are making reasonable decisions about what risks they are willing to take. That is against a background of pretty consistent warnings from the Reserve Bank that they should not overstretch themselves and it appears that banks in particular are listening to that. Phil Twyford: Is he embarrassed that despite repeatedly telling the House that loan-to-value ratios (LVRs) were the decision of the independent Reserve Bank the bank has now so publicly asked his permission to add a debt-to-income ratio to the tool kit preventing a repeat of that deception? Hon BILL ENGLISH: No—not embarrassed at all. Phil Twyford: When will he accept that telling first-home buyers to be careful and tools like LVRs and debt-to-income ratios that hammer home buyers do not amount to a housing policy and that the only serious solutions are to build more affordable homes genuinely reform the planning system and crack down on speculators?Hon BILL ENGLISH: I think that as the member knows—it has been discussed extensively in the House—increasing the supply of housing is the key to having a less exaggerated house price cycle. The biggest step forward in that has been the passage of the Auckland Unitary Plan because the Government cannot go and build thousands of houses if the council plan does not allow it to occur. This new Auckland Unitary Plan does and I want to acknowledge the member's efforts in helping the council get across the line on what is a radically different plan. Now he can look forward to increases in the supply of housing.