Government details home loan scheme expansion

Chris Carter

The Government's Welcome Home Loan scheme is to be expanded to enable more people to buy homes without a deposit, Housing Minister Chris Carter has confirmed.

"Cabinet has agreed to new criteria for the Welcome Home Loan, doubling the proportion of the national housing market accessible to people without a deposit under the scheme," Mr Carter said.

Under scheme, low-income, first-time home buyers have been able to borrow up to $150,000 without a deposit, with the Government acting as guarantor. With a five per cent deposit, they have been able to borrow up to $280,000.

"The scheme has helped about 1800 of these households into their own homes, but it needs a shot in the arm, " Mr Carter said.

"The scheme is calibrated for the lower rungs of the housing market, but since it was designed the lower quartile price of residential properties has risen 55 per cent," he said. "The no-deposit component of it now enables access to just 11 per cent of total house sales."

The Government has agreed to increase the limit for lending with no deposit to $200,000. Cabinet has also agreed to change the conditions for borrowing amounts above $200,000.

Borrowers will have pay a deposit of 15 percent of the portion of the loan over the $200,000 no deposit limit. The $280,000 maximum will remain in place.

The Government said the changes meant that a $250,000 loan would require a $7,500 deposit (15 per cent of $50,000) - 40 per cent smaller than under the existing scheme.

The changes will take effect from September 8 this year.

"Under the new criteria, a Welcome Home Loan should enable access to up to 22 per cent of national house sales without a deposit, and up to 50 per cent with a smaller deposit," Mr Carter said.

"Some 42 territorial authority districts have lower quartile house prices below the $200,000 no-deposit limit."

Mr Carter added that he would not rule out making further changes to the scheme.

"The scheme's criteria, including the top lending limit of $280,000, will remain under review throughout the year while the government considers a new shared equity scheme to reach into other parts of the housing market."

The criteria changes to date will lift the total annual cost of the scheme to about $4.9m, which will be paid for from within Housing New Zealand's current budget allocation.

Households can qualify to use the scheme if they consist of one or two people earning up to $85,000, or three or more people earning up to $120,000.