Low-income earners get housing lift

By KEVIN TAYLOR political reporter

A new scheme to make it easier for low-income earners to buy a house through Kiwibank is being launched by the Government.

Housing Minister Steve Maharey announced the taxpayer-funded $5.3 million mortgage insurance initiative with state-owned Kiwibank yesterday.

Those who qualify for the new "Kiwibank in Reach" loans will not need a deposit to buy a house worth up to $100,000, and only a 5 per cent deposit if buying a house worth more.

Deposits can also be a gift under the scheme, whereas mainstream banks usually want evidence of good savings records.

The scheme starts next month and will enable Kiwibank, a NZ Post subsidiary, to reduce the risk of lending to people with little or no deposit.

Mr Maharey said that for many people, like Housing New Zealand Corporation tenants paying market rents, home ownership was only just out of reach.

"Either their income is just slightly too low, or they aren't able to save a deposit.

"Yet once in a house they would be able to manage the repayments and keep a reasonable standard of living.

"The partnership with Kiwibank aims to make access to home ownership easier for these people."

However, he said Housing New Zealand tenants would not be able to get loans to buy the homes they were in because the Government wanted to retain state houses for those in greatest need.

Kiwibank is expected to approve about 1800 loans as part of a two-year trial.

Mr Maharey said the trial period would allow the initiative to be tested on a small scale before being expanded to other lenders, although a decision on that had not yet been made.

He said it was a commercial decision by Kiwibank to enter the trial.

The Government chose the bank, which opened for business in February last year, because it was readily accessible throughout New Zealand.

A Westpac spokesman said the bank had not seen the scheme's detail but hoped that if it succeeded it would be opened up to the wider banking industry.

An ANZ Bank spokeswoman said it was too early to comment on the scheme without seeing details.

Kiwibank's political architect, Progressive Coalition leader Jim Anderton, said last night that the scheme was an important step in re-establishing home ownership for people on modest incomes.

"Kiwibank has given the people of New Zealand significantly more banking options, including lower fees through competition, lower interest rates, more branches and the choice to invest in a bank where the profits stay in New Zealand."

Loan scheme

* Kiwibank mortgage insurance covers the loan of a couple or individual earning up to $50,000, or three or more borrowers in the same household with a combined income of up to $100,000.

* Borrowers must have a good credit history and be able to meet repayments and other conditions.

* Only available through Kiwibank, but may be expanded to other lenders after a two-year trial.

* Maximum loan $280,000.