KiwiBuild hopefuls may need big deposit

Mortgage providers indicate standard loan criteria will apply to homebuyers but finer details remain unclear

Successful KiwiBuild applicants are still likely to need a hefty deposit to qualify for a loan to buy their homes. A number of mortgage providers have told the Herald they will apply the standard loan criteria to KiwiBuild applicants.

Clive Martin, a mortgage adviser of Rothbury in Tauranga, said it was still unclear how large a deposit — be it 10 or 20 per cent — applicants would need to qualify for the scheme. He also said there had been little communication about the scheme, saying he had so few facts about KiwiBuild that he could not answer basic financial questions about the Government plan to build 100,000 affordable homes in a decade.

“I suspect there needs to be a lot more collaborative work done, with the banks particularly, to determine what the eligibility framework looks like,” Martin said.

KiwiBuild development manager Neville Johnson said KiwiBuild continues to engage with major banks about both commercial lending for residential developments as well as the lending environment for potential Kiwibuild home purchasers.

“Securing finance for a KiwiBuild home will remain a private arrangement between a lender and a purchaser and is subject to that lender’s criteria including the maximum amount that can be borrowed, level of deposit required, interest rates and repayment plans,” Johnson said.

House prices within the KiwiBuild scheme can be a maximum of $650,000 in Auckland and Queenstown and $500k across the rest of the country. Based on a minimum 10 per cent deposit, that would mean applicants in Auckland could still need a deposit of about $65,000.

At the recent KiwiBuild conference, Housing minister Phil Twyford mentioned the potential of shared equity arrangements to ease the buyer’s path to purchase but it is still unclear what this might look like.

Bruce Patten, a mortgage adviser of Loan Market, said he believed it likely that banks would be willing to accept 10 per cent deposits for a KiwiBuild home. “It seems inconceivable that Twyford went ahead without rallying the banks for support before announcing KiwiBuild, so they could confidently say ‘and by the way all the banks will lend to 90 per cent’ because the reality is that 99 per cent of the purchasers will only have 10 per cent deposits,” Patten said.

However, he added there were many variables that could impact whether banks are willing to accept a 10 or 20 per cent deposit.

“If you work it on a single application with no other debt, children or credit card facilities, you would be able to do the following: for a $499,000 purchase you would need to be earning $72,000. For a $579,000 purchase, you would need to be earning $82,000. For a $649,000 home, you would need to be earning $90,000. If you have children, or debt of a partner then the figure required would increase.”

An ANZ spokesperson said: “We support first home buyers into homes all the time and we don’t see those in the KiwiBuild scheme as being different to any other first home buyer. Buyers need an adequate deposit and the ability to afford and service the mortgage on going.”

A Westpac spokesman said mortgage applications for KiwiBuild homes were likely to be treated in a similar way as applications for other properties, with credit history, employment stability, and affordability being taken into account.