Managing House Prices vs Building Resilience When we first introduced LVR restrictions, we thought that they should be used as a temporary measure when the housing market was overheated that could then be eased or removed as the housing market cooled. What we have come to understand is that the effect of LVR restrictions on house price cycles are quite modest.
Tightening LVRs beyond a certain point can inhibit house price growth, but once loosened they have a fairly minimal effect.10 By contrast, monetary policy, through changing the level of interest rates for all borrowers, has a far greater effect on house prices than LVR restrictions.