to include nonbank financial institutions. one factor that will constrain these alternative channels is the cost of funding. unsecured lending is considerably more expensive than mortgage lending, and non - bank funding is more expensive than bank funding. in sweden, for example, it is quite common for households to borrow a portion of house purchase costs via an unsecured topup loan, and that activity increased when lvr restrictions were applied in 2010. but the borrowers who do that need to consider the higher interest rate on unsecured funds as well as the more rapid repayment of their top - up funds relative to their main mortgage. in this way there can be significant deterrent effects built into avoidance channels. the cooperation of the banks in implementing any lvr restrictions would be crucial for their success. we would expect bank management and directors to follow the spirit, not just the letter of the restrictions. in particular, they would need to ensure that the policy was not abused or undermined through innovative lending practices. certainly we would be maintaining a close dialogue with the banks. removal of restrictions when would an lvr restriction be removed? this would need to be assessed in light of the assessed impact of the restrictions on housing lending, house price pressures and the riskiness of bank balance sheets. once the housing market returned to a better balance of supply and demand, the restrictions would be removed. alternatively, we would look to remove the restrictions if they were judged not to be achieving their purpose of reducing systemic risk and / or if they were causing material distortions. if we saw a sharp correction in house prices, there would be a clear case for promptly removing any lvr restrictions. in that situation there would be little risk that removal of the restrictions would result in a resurgence of risk appetite. for example, the correction in house prices after 2007 resulted in a sharp decline in both the demand and supply of high lvr lending, suggesting that an lvr restriction would not have been necessary during this period. a preferred outcome would be a “ soft landing ” in the housing market, where house price growth moderates without resulting in a sharp correction. in that situation, the reserve bank would need to carefully weigh the efficiency benefits of removing any lvr restrictions against the risk that this might stimulate a renewed build - up of systemic risk. a persistent moderation in household credit growth would argue in favour of removal. conclusion we at the reserve bank see the current overheated housing market as a real threat to future

oecd. we have also seen consumer price inflation rise and expect it to move temporarily above 5 percent in the near term. much of this price pressure reflects the global economic impacts of covid - 19. we currently operate in a world of higher oil and energy prices, and the impact of global supply bottlenecks. the ‘ supply capability ’ of the global economy is impaired. 1 / 5 bis central bankers'speeches in addition, underlying these global price spikes are increasing domestic demand pressures, which can drive more generalised price rises and inflation. in response to the rising inflation risks, in october this year the ocr was lifted to 0. 50 % and then to 0. 75 % in november. we are one of the first central banks that have had the economic confidence to commence returning interest rates to more normal levels. the monetary policy committee expects to further remove monetary stimulus over time. it is our expectation that the ocr would eventually need to be raised above its neutral rate, conditional on the economy evolving as expected. the committee also expects to gradually unwind the additional monetary policy tools that were introduced last year. the committee stopped purchasing assets under the large scale asset purchasing ( lsap ) programme in july. we intend to manage our lsap bond holdings down in a way that maintains the smooth functioning of financial markets. more details on how bond holdings will be reduced will be provided early next year. i note that the level of government bonds on issue is a government fiscal decision. the committee ’ s decision to purchase government bonds as a means to lower interest rates is a monetary policy decision. on this note, i would like to recognise the monetary policy committee members, and the operational support of the reserve bank teams. these tools and decisions have been instrumental in our covid - 19 response. financial stability as outlined in our november financial stability report, the financial system remains resilient and is well - placed to support the economic recovery and the challenges of covid - 19. strong balance sheets for households, businesses, financial institutions, and the government going into the pandemic contributed towards maintaining a sound financial system, and yielding a faster economic recovery than following previous deep recessions. however, strong demand for housing has pushed house prices above their sustainable level, increasing the chance of a correction. recent buyers are borrowing more relative to their income, and are now vulnerable to higher mortgage rates or a fall in house prices. one of the persistent drivers of higher house prices, and asset values