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Old Scrooge McOrr is running the risk of ruining Christmas and getting off side with a lot of people.
Before he even gave his Monetary Policy Statement yesterday, Adrian Orr of the Reserve Bank appeared to be looking to backtrack on LVRs.
The deal was they would be taken off lending until May next year. Now he's looking at bringing them back in March. That’s a broken deal, that goes against your word, and leads to the question as to just what your word is worth.
That’s important because similar things have been said around the cash rate and how long it will stay where it is. People, especially banks, make major decisions over a longish period of time based on what the Reserve Bank says. So, if you're moveable on one thing, why not everything?
The banks aren't happy, and neither will first home buyers. I think, to be fair, there was an expectation given where the housing market is at, that investors might be looking for a change of setting as regards LVRs. But one of the bright spots in the market was that first home buyers were in with alacrity, proving yet again that the biggest hurdle for most first timers is not the mortgage, it's the deposit
And if you're looking at a $750,000 dollar house, the difference between a deposit of $75,000 or $150,000 is the difference between you being an owner or a renter.
The Orr view is based on his obvious fear that things are out of control, which they are not. Always remember the commercial banks in this country know what they're doing. They don't lend to people who can't pay, they're not nuts, and they're not in the business of having a pile of bad debt on their books.
Equally most people aren't stupid either. You know what you earn, you know what you can afford, and you know what you are prepared to pay.
Housing is hot right now, but it's been hot before, and it will be hot again. But it's not a bubble, it's never been a bubble, so let's cool our jets.
The Reserve Bank's role has never been more important. But it's important because it can print money, buy bonds, and use tools for lending we've never seen.
It can dig with a shovel the size no one else has. So, let's focus on that and keep the old sticky beak out of some poor 25-year olds life whose big dream is a step on the ladder, and Orr's attitude is the difference been it being realised or shattered.