A woman who tried to buy a home through Kiwibuild but was turned down for a mortgage says the way it is marketed gives "false hope" to first-home buyers and does not place enough weight on how hard it is to get a mortgage.
Kiwibuild has come under fire fromfinancial experts this week for normalising high debt and giving first home buyers an unrealistic sense of security by focusing on low interest rates.
In an email sent to 50,000 people who have registered an interest, Kiwibuild told readers how low interest rates were making the homes even more affordable and gave an example of how much less borrowers would now pay on a $500k mortgage.
The government has defended itself by saying the $500,000 home-loan figure it used and the example of how much people could save with lower interest rates were designed to be illustrative only.
But Claire, who doesn't want her last name used, said she had not been impressed by the marketing used by Kiwibuild, particularly the theme of how easy it was to get a Kiwibuild house without the emphasis on still needing to get mortgage approval.
"I was sucked into this marketing, I applied for a Kiwibuild and was then turned down for a mortgage."
Claire, who lives in Auckland, said she had saved $50k and had a good income earning more than $70k but wasn't serious about buying a house until she saw the Kiwibuild announcements.
"I thought: 'oh gosh I could do that'. I thought I could get a mortgage pretty easily."
But after she spoke to an ANZ banker she found that was not the case due to her student loan debt.
"It was a reality check."
Claire said she felt so frustrated at one point to she replied to one of the emails in protest.
"I think it is just giving false hope."
Despite that she still believed Kiwibuild was a great scheme but said much more weight needed to be given to getting a mortgage and the seriousness of taking on that kind of debt.
National's housing spokeswoman Judith Collins said the government needed to think of the risks involved when promoting low interest and low desposit options to first home buyers.
National Party MP Judith Collins.
"Low interest loans are excellent for home buyers getting into houses," Collinis said.
"The problems occur when interest rates start to rise, especially if the house does not increase in value. Houses at lower price points can lose value and wipe out all of the owner's capital if the owner has to sell because interest rate rise, meaning the owner can't afford to pay the mortgage."
Collins said low interest loans coupled with low deposit requirements were a "recipe for disaster" if there were any increases in interest rates or decreases in value.
"These two can often occur at once."
A spokesman for Twyford said yesterday the Government was not encouraging people to borrow $500,000.
"The KiwiBuild unit was just giving an illustrative example highlighting the lower interest rates."
He referred the Herald to KiwiBuild's communications manager for queries on the advertising because it was an operational matter.
KiwiBuild spokesman Clint Smith said it had used the example of the $500,000 mortgage for information purposes only.
"KiwiBuild used an illustrative example of how falling mortgage interest rates are making buying a KiwiBuild home more affordable in comparison to renting. As you have noted in past articles, renters tend to have less financial security and are more likely to struggle to make ends meet.
"KiwiBuild is helping people get into homeownership at cost that is more affordable than the open market."
