However, with mortgage interest rates at a 50-year low, large housing shortages in Auckland and Christchurch, and surveys indicating that home buyers expect price rises to continue, a lower OCR would quickly feed into higher house prices and further increase the risks to financial stability. This is where macro-prudential policies can play a useful role.
Capital and liquidity overlays can help build up buffers in the banking system while adding to the cost of bank funding. And loan-to-value restrictions may help to reduce the actual supply of mortgage lending.