Will 5% deposits help first-home buyers?

3 Keith CP3

Posted 4 months ago by Pope & Co. Mortgages

The government recently announced changes to its building programme KiwiBuild, effective 1 October 2019, to help support more people into home ownership. This includes changes to the HomeStart Grant and Welcome Home Loan, with a reduced 5 percent deposit requirement for Welcome Home Loans.

Craig Pope, of Pope & Co. Mortgages, says there is some good news for home buyers, however the main issue is that we still have a housing supply challenge, particularly in Wellington with skyrocketing house prices.

“Buyers will need to understand and think about the criteria carefully. Just because you have a $40,000 deposit doesn't automatically mean you can buy an $800,000 house! There are still Welcome Home Loan house price caps and lending criteria to navigate through,” says Craig.

The key changes outlined by the Ministry of Housing and Urban Development include:

  • The Welcome Home Loan is now called the First Home Loan and the deposit is reduced to 5 percent for new and existing homes.
  • The First Home Grant can now be paid to all buyers, subject to existing income caps.
  • Occupation rules for owners of studio and one-bedroom apartments is reduced to one year.
  • Removal of the asset test for previous home owners or ‘second chancers’.
  • The three-bedroom or more KiwiBuild price cap for the Wellington Region will be increased to $550,000.


The question is will the 5% deposit reduction really make a difference?

“There will be a few capable borrowers who have reasonable incomes and minimal debts, but with only a 5% deposit that will realistically be for buying/living in the outer suburbs. Given the house price caps are so low, e.g. in Wellington $500,000 for an existing house, I don't think lowering the requirement to 5% will help that many people,” says Craig Pope.

The lending criteria can be complex to understand and to figure out how much you can borrow. It’s best to seek advice from a qualified mortgage broker. You will need to provide information such as your salary, time in your current role, total house deposit, where it’s sourced from and any debts/credit history. A mortgage broker can quickly advise you of your best position and options.

Although it’s a complex process to navigate it’s actually easy to get started! Read more here about getting started and how we can help you, or call us on 0800 000 517 for a no obligation chat.

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