Reserve Bank of New Zealand governor Graeme Wheeler has warned that the "last thing New Zealand needs is another housing bubble", which he said was why the bank was working quickly to have macro-prudential tools ready to use from later this year.Wheeler made his strongest comments yet about house price inflation and the need for other tools to control it in an appearance before Parliament's Finance and Expenditure Select Committee, after releasing the RBNZ's March quarter monetary policy statement.The Reserve Bank held the official cash rate at its record low 2.5 per cent and pledged to keep it there until 2014, arguing that the strong New Zealand dollar was helping offset the inflationary effects of the housing surge and a boom in construction to rebuild the earthquake-shattered city of Christchurch."The last thing we need, given we have an overvalued exchange rate and a drought that could deteriorate quite significantly - time will tell on that - is a housing bubble that gets out of control," Wheeler said.Auckland house prices were up 14 per cent in February from a year ago, while Christchurch house prices were up 12 per cent. There were signs the inflation was spreading to other areas, with growth accelerating to 4.25 per cent."That's one of the reasons we have moved quite fast on these macro-prudential tools," he said.At his previous appearance, with the release of RBNZ's December monetary policy statement, Wheeler said the surge in the housing market and lending growth was not serious enough yet to justify the use of the tools. The tone of his comments has toughened markedly over the past three months.In a news conference yesterday, Wheeler said he was concerned about a surge in high loan-to-valuation ratio lending over the past year. He said LVR lending of 80 per cent to 90 per cent had risen to 20 per cent of all new lending, while LVR lending of over 90 per cent had risen to 10 per cent of new lending. The RBNZ released a consultation paper on macro-prudential tools earlier this month. Submissions close on April 10 and the Government has said it wants a framework agreed with the bank by the middle of this year to be able to start using the tools. They include potential limits on LVRs, higher capital requirements for mortgage lending, higher minimum thresholds for local and long term funding and a counter cyclical capital buffer.However, Wheeler and his deputy Grant Spencer downplayed the likely effect on the housing market if the tools were used. Spencer told the select committee the tools were unlikely to stop the housing market dead and would have less impact than a 25 basis point increase in the OCR.Spencer said the tools would have the effect of increasing the cost of funds for the banks of between 10 to 20 basis points. Meanwhile, the bank also warned it may have to cut the OCR if the New Zealand dollar rises further from an already over-valued level. Wheeler said he thought the