Including a debt to income measure in our toolkit would help with reducing the probability of default. Therefore, these two policy tools deal with different sources of risk: LVRs with the risk to banks from a fall in house prices, and DTIs with the risk to households from a fall in income.
We see reducing the probability of default and loss given default as two complementary policies in creating a more resilient financial system. As with LVR restrictions, we see DTI measures as policies aimed at reducing through-the-cycle risks. And indeed DTIs might well be better at managing such risks, as income tends to vary much less through the financial cycle than the value of houses.