The Reserve Bank of New Zealand has announced that the big four Australia-owned banks will have to hold around NZ$500 million more capital to back mortgages with high loan-to-value ratios from September 30 this year.The move was signaled in March as part of a review of risk-weighted capital requirements for banks after a surge in high LVR lending over the last year. The RBNZ is grappling with double-digit house price inflation in the two biggest cities, Auckland and Christchurch.It is worried this might spread into consumer price inflation and that a slump in house prices could endanger financial stability.The RBNZ announced the change in its half-yearly Financial Stability Report in which it also warned that fast-rising house prices were increasing the risks to financial stability."Housing pressures are increasing risk in the financial system," Reserve Bank governor Graeme Wheeler said.  "House prices relative to disposable incomes are already high by international standards.  Further price escalation will worsen the potential damage that could result from a housing downturn following an economic or financial shock," Wheeler said.The Reserve Bank said the changes to capital rules for high LVR loans would result in an average increase in the capital held for housing of around 12 per cent, which equated to an overall capital increase of around six per cent, given that around half of the banks' risk weighted assets are in home loans.The 12 per cent increase is below the 14 to 23 per cenr range estimated in the RBNZ's consultation paper.RBNZ deputy governor Grant Spencer said the first stage of a review of capital requirements for mortgage lending had been completed."Looking forward, we want to ensure that bank capital requirements adequately reflect the risks around housing lending and accordingly we are undertaking a housing capital review," Spencer said."In the first stage of this review the Bank is increasing the risk weights applying to high LVR housing loans for the four major banks that use their own models as a basis for calculating minimum capital requirements," he said."The increase in the risk weights, applying to all current and new high LVR loans for the major banks, will result in an average increase in capital held for housing of around 12 per cent and will take effect from 30 September 2013."Meanwhile, the Reserve Bank said it was close to signing a memorandum of understanding with Finance Minister Bill English for a framework for using macro-prudential tools. This had already been foreshadowed for mid-2013.The bank said it did not envisage major changes to the proposals for the framework it released in early March, which included changes to the rules for bank core funding ratios, a counter-cyclical capital buffer, specific capital requirements for lending to certain sectors, and restrictions on high LVR lending.Spencer said the Reserve Bank would consult further with the banks over the next two months to "establish the implementation details of the various instruments so that we are able to use them as necessary."