In his 2005 Budget speech, Finance Minister Michael Cullen said the government will also launch a home ownership education program and will link its new "KiwiSaver" retirement savings program to assisting home ownership.
Under the KiwiSaver scheme, the government will offer people a deposit subsidy of $1,000 for each year of membership of the scheme up to a maximum of $5,000 which can be accessed to pay a deposit on a house from the third year of saving.
The government will also contribute an upfront payment of $1,000 to everyone who take up the voluntary KiwiSaver scheme. The KiwiSaver program will start from April 1, 2010. Unless used for a house, the money saved cannot be accessed until retirement or until after five years, whichever is the greater.
Up to 3,000 households a year are expected to take up this offer which is estimated to cost up to $35 million a year. Currently, fewer than 1,000 people a year are accessing the scheme.
Income and purchase price caps will apply but have yet to be finalised. House price caps will reflect regional price variations.
The subsidy will be in the form of a suspensory loan, rather than an unconditional grant, and will have to be repaid if the recipients stop living in the house within a reasonable period.
Housing minister Steve Maharey says the mortgage insurance scheme is expected to help 5,000 to 8,000 first home buyers a year. "It does not exclude low income households, but is aimed primarily at those earning above $40,000 a year, as borrowers must be able to service a mortgage," Maharey says.
Applicants will still need a good credit history, can’t already own a home, and intend to live in the house.
Housing New Zealand Corporation insures against bad debts by charging a premium of 3% of the loan, 1% paid by the borrower and 2% by the government. The government has also raised the income limit to qualify for the scheme from $65,000 to $85,000 a year for a household with one or two borrowers and from $100,000 to $120,000 for households with three or more borrowers.
