UPDATE 1-NZ house lending limits may reduce rate rises - RBNZ's Spencer
* LVR restrictions aimed at reducing systemic risk - Spencer
* RBNZ message aimed at explaining moves to public - economist
* Global house prices looking "bubbly" - Nobel Prize-winning economist
* Auckland house prices up 17.5 pct in yr to Sept - REINZ (Adds economist comment, data on house prices, context on global prices)
By Naomi Tajitsu
WELLINGTON, Oct 15 (Reuters) - New restrictions on low-deposit mortgage lending in New Zealand may reduce the scope of rises in official interest rates, and as a result, ease upward pressure on the currency, Reserve Bank of New Zealand Deputy Governor Grant Spencer said on Tuesday.
In an effort to cool record housing prices in Auckland and Christchurch, the country's biggest cities, the RBNZ this month imposed restrictions on the amount banks can lend in low-deposit mortgages.
The central bank is concerned that an overheated housing market will ramp up overall inflation, which could force it to raise rates aggressively from a record-low of 2.5 percent sooner than the mid-2014 timeframe it has identified.
"The LVR restrictions are intended to reduce the build-up of systematic risk in the New Zealand financial system," Spencer said in a speech in Auckland.
"They will also potentially reduce the extent of interest rate increases, and hence exchange rate pressure, that may be needed in the coming cycle. The LVR restrictions are also expected to reduce risk in the banks' balance sheets."
From Oct 1, banks have had to keep lending to borrowers with mortgages of less than 20 percent of a property's value -- the so-called high loan-to-value ratio lending (LVR) -- to no more than 10 percent of their total lending.
The moves are being closely watched in other developed countries, where surging house prices are raising concerns among economists and policymakers.
Nobel Prize winning economist Robert Shiller on Monday expressed alarm about the rapid rise in global housing prices fuelled by economic stimulus measures, super low interest rates and growing market speculation.
"There are so many countries that are looking bubbly," Shiller said.
A surge in activity and signs of a pickup in prices has driven much speculation of a developing housing market bubble in neighbouring Australia, though the central bank there has been quick to dampen such fears.
The RBNZ measures have raised concerns among first-time home buyers, who typically have smaller deposits, that they will be shut out of the market. Already, New Zealand has among the highest housing costs relative to income in the world.
Prices have surged in recent months, with house values up 9.8 percent nationwide in the 12 months to September, according to figures from the Real Estate Institute of New Zealand. Prices are up a hefty 17.5 percent in Auckland and 11.4 percent in Christchurch, which is rebuilding after a devastating earthquake in 2011.
"You get the feeling that this speech has been aimed at the general public to get them to understand what the Bank is doing," said Stephen Toplis, head of research, Bank of New Zealand.
In the last housing boom, between 2001 and 2007, the median house price doubled, which saw the RBNZ raise its benchmark rate by a total of 350 basis points to a record 8.25 percent.
"What they're saying is that they do know that the next move in interest rates is up, they do know that that time is rapidly approaching, but that they just want to buy themselves some time before raising."
Expectations of rate rises in 2014 have underpinned persistent strength in the New Zealand dollar, which the RBNZ said is excessively high and a headwind to the export-orientated economy. The kiwi is trading around $0.8360, within 5 cents of its post-float high. (Editing by Lincoln Feast and Shri Navaratnam)