It’d mean a person earning the median income could only afford a $200k house – not a lot when the average house is $820k.

A report given to him last month suggests capping debt at around six or seven times a borrower’s income – because that “would have little impact on first-home buyers” and significantly squeezes investors.
“The writing is on the wall,” says Olsen.
The median annual income nationwide is almost $34,000. A debt-to-income cap of six would mean the maximum mortgage that earner could get is about $200,000 – not much when the median national house price is now $820,000.
“The rich will get richer and the poor will get poorer,” says Patten.
Other countries have much lower limits – Ireland’s is 3.5, and the UK’s is 4.5. But we already have super-tight lending restrictions, meaning most buyers need a 20 percent deposit, and investors 40 percent. 
“There’s this real feeling still that our financial system may be at more risk because we have very high levels of debt coming forward,” says Olsen.
It’s important to note that limits aren’t coming in yet. The Reserve Bank will talk to banks about it over the coming months, and if it goes ahead it’ll consult with the public first. 
But it does now have a Government-approved ‘go’ button to push whenever it likes. 
The Reserve Bank is quickly becoming Grant Robertson’s biggest muscle; he’s thrown almost all responsibility to rein in the housing market across to them. 
The central bank has wanted to do this for years; its plan to add debt-to-income caps to its toolbox wasn’t accepted by the National Government.
But with recent price growth, this Government will give it whatever it wishes. Although not without ensuring a large chunk of its voters – first-home buyers – are protected first.