Landlords are in the gun with the Reserve Bank seeking feedback on ushering in a tougher new mortgage regime for residential property investors.
Steeper lending charges have been widely expected and now Toby Fiennes, the banks' head of prudential supervision, has released details of the consultation the bank is embarking on which closes on April 7.
He indicated landlords could be a danger to New Zealand's financial system in the event of a housing collapse.
"International evidence suggests that default rates and loss rates experienced during sharp housing market downturns tend to be higher for residential property investment loans than for loans to owner occupiers," he said.
"The proposal would bring the Reserve Bank's framework more into line with the international Basel standards for bank capital.
"The proposed rule amendment is designed to ensure that banks hold adequate capital for the risks that they face from investment property lending," he said.
A statement from the bank said it had previously consulted on a loans to borrowers with five or more residential properties classified as loans to residential property investors.
"Partly as a result of submissions received, the bank has reconsidered the definition, and is now consulting on three possible alternative ways to define loans to residential property investors," Fiennes said.
Possible alternatives are:
• If the mortgaged property is not owner-occupied
• If servicing of the mortgage loan is primarily reliant on rental income
• If servicing of the mortgage loan is at all reliant on rental income