If the Bank of International Settlements is to be believed, the Reserve Bank of New Zealand is wasting its time imposing loan-to-valuation ratio limits in a bid to keep a lid on growth in the New Zealand housing market. A new BIS study says that only a couple of macro-prudential tools are effective in controlling growth in the housing market - and the LVR limit is not one of them.The BIS has published a paper that analyses the effectiveness of non-interest rate policy tools in stabilising house prices and housing credit. The analysis uses a data-set that includes nine different policies used in 60 countries, dating back to 1980.These tools include the application of reserve requirements, maximum debt service-to-income ratios, maximum loan-to-valuation ratios, and limits on exposure to the housing sector and housing-related taxes.The authors of the paper, who work in the BIS monetary and economic department, found that only the debt service-to-income ratio limit has a "statistically significant" effect on housing credit growth.They found that changes to housing-related taxes that affect the cost of buying a house were "the only policy tool with a discernible impact on house price appreciation." Taxes under consideration included capital gains, wealth and value-added taxes, subsidies (such as first-home buyer grants), fees (such as stamp duty) and tax deductibility of mortgage interest payments.The report said: "The impact of interest rates on house prices is economically significant but not large enough to achieve a meaningful degree of restraint. An interest rate hike of sufficient size to meaningfully dampen house prices growth would run the risk of causing a recession."The recognition of interest rates' limitations has left policymakers searching for other tools to tame housing and other asset markets."Under the RBNZ's rule, which took effect last month, lenders are limited to writing no more than 10 per cent of new business at LVRs of above 80 per cent.According to the report, the problem with loan-to-valuation ratio limits is that housing credit will continue to rise with house price growth. That is, if the maximum LVR is 80 per cent, as long as house prices increase, households will be able to increase their borrowings.However, in the case of a debt service-to-income ratio, household income does not usually grow as fast as house prices, so tightening will be more effective."Reserve and liquidity requirements, and limits on credit growth have little or no detectable effect on the housing market," the report said.