Banks and the Reserve Bank have for a long time viewed mortgage debt as ‘safer’ than other types of debt. That means that banks have been able lend more and at lower interest rates than they can for other types of debt.
The sheer size of mortgage lending has now rendered that assumption of mortgage debt being ‘safer’ as false. Loose lending restriction in the past have contributed to the boom in house prices and growth in debt that now puts our economy at risk. New Zealand is now dependent on foreign lending, and if foreign lenders decide that New Zealand is looking like a riskier place to put their money then they may not want to lend to us, or if they do they will demand higher interest rates. This could make it difficult for people to repay their mortgages.
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