The government and Reserve Bank have agreed on new moves to tighten mortgage lending, including tougher loan to value ratios and debt to income ratios, to cool the housing market.
In a statement, Finance Minister Grant Robertson says he has updated the Memorandum of Understanding between the Reserve Bank and the government, adding the debt serviceability tools.
It would include reducing to 10 per cent - down from 20 per cent - the amount of lending banks can do above 80 per cent loan-to-value ratios.
It also planned to consult on debt-to-income restrictions and interest rate floors.
Robertson says they have also clarified in the memorandum that the bank would need to avoid negative impacts on first-home buyers where possible.
"I believe this agreed wording will set clear public expectations while maintaining the operational independence of the Reserve Bank. It is still up to the Reserve Bank how it chooses to introduce any restrictions, having had regard to this condition," says Robertson.