Kiwisaver first home plan changes considered

The Government is considering changes to the rules on using Kiwisaver for a first home deposit, housing minister Nick Smith has confirmed.

The Reserve Bank is weighing up restrictions on how much banks can lend to home buyers to cool the market. The proposals have attracted criticism that it will make it harder for first-time home buyers to get on the property ladder.

Smith today indicated the government is reviewing the criteria that allows Kiwisaver holders to access Government grants to buy a house. He indicated income caps (of $100,000 per year for two people) and house price limits (of between $300,000 and $400,000) on the start-up help may be revised.

''I'm worried that the income thresholds and household thresholds have not been shifted for some years, and as a consequence, that's a barrier,'' Smith told TVNZ's Q + A this morning.

''I'm having a fresh look at that, and we may make some moves in parallel with the Reserve Bank around where those thresholds are to make it easier for home buyers as we try and deal with this bigger problem.''

The maximum house price is $400,000 in Auckland, Queenstown, Selwyn and Wellington - and Smith argued it is difficult to buy a home in that bracket in Auckland.  He said the criteria must be realistic and the Government needs to respond to changes in the market.

Under the RBNZ proposals, banks must restrict the number of loans they approve with deposits of less than 20 per cent.

Head of the Bankers' Association, Kirk Hope, today warned the restrictions may force some homebuyers to seek out loan sharks or high interest lenders. He cited Canada and Sweden, which have introduced caps and seen first time buyers access the unsecured lending market to build up a deposit.
"It'll not just be first home buyers, but it might be small businesses that are trying to access additional capital.  High LVR loans will reduce from around about 60 per cent, so what you'll see is quite a reduction in the demand by restriction for those types of loans," he said.
However, he supported a move to shake-up Kiwsaver criteria to help first-home buyers. 

Smith said he is confident the Government and RBNZ will ensure ''a package that works well for both the NZ economy and for those aspiring young families that want their own home".

''KiwiSaver, of course, helps the concerns that the Reserve Bank Governor has, because he's worried about people going in with zero, 5 per cent – very low deposits on homes. If we're able to get KiwiSaver working, get people's deposits built up, then he is comforted by the fact that there are less of those very risky mortgages – 95 per cent, 100 per cent." he added.

But Labour hit out at the move, saying the Government is punishing first time buyers ''by cracking open more of their retirement savings.''

Housing spokesman Phil Twyfird said increasing mortgage deposits from 10 to 20 per cent would add $60,000 to the deposit required for an average Auckland home. ''There is no way several years of Kiwisaver contributions on the average wage would come anywhere near compensating for that,'' he said.

Five years of contribution at 3 per cent on a salary of $60,000 would generate just $9000, he argued.

Struggling first time buyers ''face hefty minimum deposits, forcing them to crack open their retirement savings or turn to loan sharks," he said.

Labour wants a temporary exemption for first home buyers on the proposed restrictions until supply in the housing market improves.


* After 3 years of contributions - at 2 per cent of your income or more - Kiwisavers are eligible for a first home deposit subsidy

* The subsidy is $1000 for every year of contributions, up to a maximum $5000

* Couples can apply for a combined subsidy of up to $10,000. But an income cap of $100,000 per household applies. This rises to $140,00 for three people buying a house together

* The house must not cost more than $400,000 in Auckland, Queenstown or Wellington, or $300,000 in other areas.

* Buyers must plan to live in the home for at least six months.

* The subsidy is paid to your solicitor on settlement day.