The Reserve Bank of New Zealand says its mortgage lending limits appear to be slowing down home price growth.

The RBNZ imposed a cap on the proportion of low deposit (less than 20 per cent) loans that banks could issue, with such loans making up no more than 10 per cent of the total - they had been running at about 30 per cent.

Such moves are being closely watched by Australia's Reserve Bank, which is confronting a similar dilemma to its trans-Tasman counterpart, with home prices surging while other parts of the economy remain subdued and the local currency still stubbornly high, making an interest rate rise to slow home price growth undesirable.

Recent research and comments from the RBA suggest that, if it did introduce so-called macroprudential policies, it would opt for mandatory, increased interest rate buffers to be used by banks when assessing a borrower's ability to meet repayments.

Such a move would mean that a borrower's ability to meet repayments might be tested against a 3 or 4 per cent rise in interest rates, rather than the 2-2.5 per cent stress test many major institutions use.

However, while RBA and Bank for International Settlements research suggests that higher interest rate buffers may be more effective than limits on low deposit lending, the RBNZ says its policy does appear to be working to put a lid on home price rises.

In an article in its latest Bulletin released earlier this week, the RBNZ says total low deposit lending has fallen to 7.8 per cent, even including loans that are exempt from the cap.

The bank says this has fed through to a 13 per cent drop in home sales over the five months to February, since the policy was introduced in October last year.

The RBNZ also says home price growth has slowed to 8.2 per cent over the year to February, down from 9.8 per cent over the year to September 2013.

The bank says its modelling suggests home price inflation would likely have been 2.5 percentage points higher over the year to February if no macroprudential action had been taken.

Slower price rises have also led to a stabilisation in house price expectations among households, although these remain very high with nearly 70 per cent of New Zealanders expecting further gains.

The lower housing turnover and slower price growth has also seen early signs of a fall in housing credit growth.

With recent RP Data - Rismark figures showing Australia posted its strongest monthly home price growth on record (in figures that go back 18 years), the RBA will no doubt be casting an eye over the successes, or otherwise, of its New Zealand counterpart.