KEY POINTS:
Homeowners will not be able to put part of their KiwiSaver contributions towards their mortgages from next month as originally promised.
Banks are postponing accepting mortgage diversion applications from KiwiSavers because of an unwieldy clause in the scheme's regulations.
KiwiSaver has its first birthday next week and the rules say that after 12 months in the scheme savers may divert up to half their own contributions towards their mortgages.
People with revolving credit mortgages are excluded to prevent them drawing down on the funds and spending money on other things.
The New Zealand Bankers Association says many mortgage agreements also cover the use of credit cards or bank overdrafts, and are caught by the exclusion.
"The banks have decided that it will be simpler and easier for everyone if applications to use the mortgage diversion provisions are not accepted until August," chief executive Alan Yates said.
Inland Revenue was working with the industry to amend the regulations but that would not be done in time for the original July 1 deadline, he said.
Peter Hall, ASB's head of business ventures, said the way the regulations were worded meant only about 10 per cent of the bank's mortgage holders would be eligible for the provision.
