Home loan scheme to be loosened

First-home buyers will be able to borrow more under the Welcome Home Loan mortgage insurance scheme.

The scheme allows low- income earners to borrow up to $200,000 without a deposit.

A 15 per cent deposit is needed to borrow more.

The previous cap was $280,000, but Housing Minister Phil Heatley announced yesterday it would be extended to $350,000.

The Cabinet has also approved the use of the scheme to help people build on multiple-owned Maori land, Heatley said.

"While house prices and interest rates have recently come down, bank deposit requirements have increased," he said. "This will also help tenants living in eligible state homes to buy their property."

Banks were cautious about lending for properties on multiple-owned land because it could not be used as security. The change also let buyers take out loans for houses to be built on land already owned by them.

"We want to encourage the building of new houses and in doing so stimulate the construction sector," Heatley said.

Those wanting to borrow at the top end of the scheme will be eligible only if they intend to buy a house in a high-priced area.

NZPA