Finance Minister Bill English expects to sign an agreement with the Reserve Bank by the middle of this year allowing it to take more direct steps to control house prices.
Under the Government's proposals, the central bank will be able to dictate lending criteria for commercial banks.
The plan is for the Reserve Bank to set loan-to-value ratios so commercial banks would require borrowers to have a bigger deposit before buying a house.
During a speech in Auckland on Wednesday, Mr English said there were some expectations that the tool could be used immediately to slow down the Auckland housing market.
However, he said it would be up to the Reserve Bank if and when it uses this measure.
Mr English said interest rates and supply constraints created by planning laws continue to have the biggest impact on house prices.