When interest rates are low, households can accommodate a higher level of debt for given incomes; though they remain susceptible to adverse macroeconomic shocks.3 For example, if bank funding costs escalate due to distressed offshore funding markets, lending rates in New Zealand would rise, and households may find it hard to service debt.
I want to dedicate the remainder of my remarks to regulation and supervision in the light of Brexit. My main message here is that we must avoid a regulatory race to the bottom at all costs. Given how the Brexit debate developed early this year, this warning is not at all an empty one.