The government-backed lender is offering the high LVR loans in an effort to win business from younger buyers.
It comes as the government's $2 billion project to deliver 100,000 starter homes begins. Potential buyers are able to enter a ballot for the homes, which are capped at $650,000 in Auckland and Christchurch.
The initiative has been hit with delays, with the government likely to invest less than initially expected in 2018 and 2019.
Kiwibank marketing manager Mark Wilkshire said the lender was keen to back more first time buyers amid a chronic shortage of housing stock: “Home ownership rates are now at the lowest level in over 60 years, there are not enough homes being built and not enough starter homes. First home buyers are struggling to get on the property ladder and KiwiBuild could help to address this issue.
“Kiwibank economists believe New Zealand has a shortage of over 100,000 homes. Supply has not kept pace with demand. Demand is still growing and capacity constraints are being hit. Kiwibank supports New Zealand’s need for more affordable dwellings," Wilkshire added.
Kiwibank will pre-approve customers up to 90% of the value of a KiwiBuild home. The move comes despite Reserve Bank restrictions limiting high LVR lending. New build homes are exempt from the restrictions.
Wilkshire said: "There is an expectation that, as the largest New Zealand owned bank, we help as many first-home buyers as we can. KiwiBuild has potential to be a game changer for the residential housing sector and we are keen, as always to make a positive difference for our customers and the New Zealand economy."
