Reserve Bank agrees to buy home loans

[emcd]

What does this mean?

Interest rates will drop?
Banks don't need to borrow money from offshore?
Banks don't have any risks for their homeloan?

Please clerify!


Reserve Bank agrees to buy home loans

Sunday, 26 October 2008

The central bank has agreed to accept $8.7 billion of housing loans from the ANZ National and Westpac banks as security.
The banks are the first to take up the Reserve Bank's offer to provide extra liquidity during the global financial crisis, Radio New Zealand reported.
Westpac said it has not drawn on the facility yet but might if market conditions remained difficult.
Banking analyst David Tripe said other banks including ASB and BNZ were working on a similar arrangement.

[emcd]

Does that mean the taxpayers will pay the loses if the housing value drop another N%? Or RBNZ will keep droping OCR to make sure the house value will be held?

[Rem]

Isn't NZ just copying what the US has done/is doing?
The taxpayer will fund this guarantee in NZ, same as US.

You gotta let it crash sometime, it cannot continue indefinitely.

[mortgage broker]

I think that it will take a bit of pressure of and will encourage the banks to continue some kind of lending.

The banks have to secure funding for their existing loan books as well as any new lending I would guess.

Yeah I would guess that the tax payer would wear the losses if the house values drop significantly and a whole bunch of people decide to run away from their commitments.

But I think that if this is not offered and lending goes backwards tax payers will suffer even more through major job losses and maybe exposure to higher rates or un certain interest rates.

[muppet]

The central bank has agreed to accept $8.7 billion of housing loans from the ANZ National and Westpac banks as security.

Just a thought:

If some of the home owners can't pay their mortgages to the banks concerned and the banks give the homes to the Reserve Bank, the RB could give the homes to the Government and then there would be lots more state houses.

[Green Fish]

Quite right.

But given that the Reserve Bank will have paid over twice the actual value, the NZ taxpayer will spend the next 20 years paying off the debt.

So the most desirable occupation in NZ for the next couple of decades will be "beneficiary".

I'm hacking my left leg off as we speak.

[outspoken]

You didn't need to go to that extreme GF!

I'd happily vouch for the fact that you are mentally unstable and therefore unfit for work ....lol

This doesn't mean the RB will end up with mortgages, they are just using them as security for loans to the Banks. If they had to call in the Banks loans, then defaulting purchasers would be the least of their worries!