Labour leader David Cunliffe says mortgage lending limits unfairly hit first-home buyers where house prices aren't increasing.
Reserve Bank changes to the loan-to-value ratio (LVR), which take effect from tomorrow, will limit high LVR lending to a 10 percent of banks' home loan portfolios.
ASB Bank is the first to change their policy by cancelling all pre-approved loans for customers who have a deposit of less than 20 percent.
Mr Cunliffe says lending limits lock out thousands of first-home buyers out of the market which will create a generation of renters.
"Lending limits are National's failed attempt to solve the Auckland housing problem. But it is families in places like Marlborough, where prices are falling, that are being asked to fix it by saving more for a deposit.
"Why should a family in the regions have to stump up thousands of dollars more for a deposit to solve the housing problem in Auckland? If he [John Key] really believes people in the regions think his policy is fair, then he is completely out of touch," he says.
Labour would tell the Reserve Bank it must exempt first home buyers when using LVRs and consider only placing restrictions on regions where house price inflation is high.
It would also use a capital gains tax to "clamp down" on speculators and build 100,000 affordable first homes through KiwiBuild, he says.
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