Household balance sheet – The household sector has been the most obvious source of imbalance in New Zealand with balance sheets heavily skewed to housing, high debt ratios, and very low traditional savings via financial instruments.
By offering the prospect of better meeting desired risk profiles and by separating origination from investment, it has brought more nonbank financial institutions, and so more capital resources, into the credit markets, increasing the supply of credit (Diagram B). This seems to have been borne out in the significant shift in actual credit quantities and prices up to the middle of this year.