Income caps are a double-edged sword
‘‘The increased price caps and the recognition of single parents or other households with dependents on one income is really encouraging...’’
Charlotte Fielding
First-home buyers will be able to access First Home Grants and First Home Loans on a wider range of properties thanks to changes in this year’s Budget – but brokers say the income caps may mean it’s hard for many people to make use of the change.
The Government has removed the purchase price cap for First Home Loans and increased it for First Home Grants. The loan enables people to purchase with a 5% deposit because it is underwritten by the Government. Grants of up to $5000 per buyer, or $10,000 for a new build property, are available when people meet KiwiSaver saving criteria and withdraw from their KiwiSaver funds for a first home.
New caps for the First Home Grants will lift to $875,000 in the Auckland region for existing and new build properties. In Tauranga the cap will be $800,000 for an existing property and $875,000 for a new build. In Queenstown-Lakes, the grant cap will lift to $875,000 for existing properties and $925,000 for new builds.
In Wellington, the cap rises to $750,000 for existing properties and $925,000 for new builds.
But in both cases, there is an income cap – people must earn less than $95,000 as a single person or $150,000 as a couple, or a single person with dependents, to qualify.
Broker Glen McLeod, of Edge Mortgages, said it would be hard for people to qualify for higher-priced houses with the income limits set, particularly given the new responsible lending rules that required banks to be stringent about ensuring people could afford their loans.
He said, to buy a property at the new Auckland cap of $875,000 would require a couple to have the maximum $150,000 income allowed, and no debts. ‘‘The income position is already quite tight for the first-home buyers under the existing rules and caps. It is great to see the house price cap increasing as it was not really possible to find a property at the values that were on place.
‘‘By increasing the grant and loan cap I believe will be a hard push unless the applicants have no short term debt or fixed commitments due to the income cap.’’
Wellington woman Charlotte Fielding is hoping to buy a house soon and said the new limit seemed more realistic. ‘‘I definitely think it will help me. Although I fit under the income cap before, the house price cap was so unrealistic for Wellington it seemed like one of those schemes that was just paying lip service to helping first-home buyers without actually being practically useful. The increased price caps and the recognition of single parents or other households with dependents on one income is really encouraging and I think it will make it easier for me to purchasemy first home.’’
Another broker, Bruce Patten, of Loan Market said he knew of two first-home buyers who would now be eligible when they were not previously.
‘‘We are increasing the house price caps for the First Home Grant to align with lower quartile market values for new and existing properties. This recognises the changes in house prices over the past year,’’ HousingMinister Megan Woods said. ‘‘Income caps and lender requirements are sufficient to ensure that the First Home Loan is used by buyers who need support for a first home.
‘‘We estimate that these changes, along with other changes to the eligibility criteria, will help thousands more first home buyers, with funding available for approximately 7000 extra First Home Grants and 2500 extra First Home Loans available every year.’’