The Reserve Bank of New Zealand has warned against excessive lending growth in housing in its half-yearly Financial Stability Report.House prices have bounced five to 10 per cent in Christchurch and Auckland, respectively, over the past year because of housing supply shortages, and a surge of competitive activity between the major banks has loosened credit standards."Some increase in credit will be necessary to sustain economic growth, but excessive credit growth could hinder rebalancing of the economy and accentuate existing vulnerabilities," the RBNZ said in its report."House prices are rising, particularly in Auckland, in the face of housing supply constraints. Excessive credit growth could worsen housing market imbalances given that house prices appear overvalued on a number of measures," it said. House price to income ratios in New Zealand have dropped from the 2007 high of around 5.5 times borrowers' income, but are still over 4.5 times borrowers' income and well above pre-boom levels of three to 3.5.The Reserve Bank stopped short of suggesting what it would do to curb credit growth. Former Reserve Bank governor Alan Bollard has previously said the bank would look at imposing loan-to-valuation ratio limits, but stopped short of taking concrete steps. Both the Bank of Israel and Canada's banking regulator have recently imposed such LVR limits to control their housing booms without having to increase official interest rates."While the lift in credit demand has been relatively subdued to date, a significant reversal in household savings behaviour and excessive credit growth would be a cause for concern - particularly if seen in conjunction with a surge in house prices and/or excessive risk taking by New Zealand banks," the Reserve Bank said.It noted that there appears to have been a loosening of home loan standards in recent months, with high loan to valuation ratio lending becoming more prevalent.  "Discussions with banks suggest that high loan to value ratio loans are now beginning to form a significantly larger share of new mortgage lending than has been the case for most of the period since the financial crisis," the bank said."However, with households still relatively indebted and house prices remaining overvalued by some metrics, banks will need to remain alert to the risks associated with a marked acceleration in credit growth… [in] the household sector."