The scheme, which began in September 2003, is set to run for two years and the plan allowed for up to 1,600 loans over that period.
The current rate of progress suggests the pilot scheme will fall short of that target which it ends this September.
"What it suggests is that the lack of a deposit is not the real problem," says David Tripe of Massey University’s centre for banking studies.
Under the scheme initially, couples with joint incomes up to $50,000 or groups of three or more with joint incomes of $100,000 could qualify for loans of up to $100,000 without a deposit and for houses costing up to $200,000 with a deposit of only 5%.
That 5% could be gifted rather than the applicant having to prove a savings record.
In December last year, the government increased the earnings limit of a couple to $65,000 and the amount they could borrow without a deposit up to $150,000.
Kiwibank markets the scheme as its "In Reach Home Loans," suggesting to would-be borrowers that they can become their own landlords.
The element of government subsidy is a form of lenders mortgage insurance: the government budgeted $5.3 million over the two years to back any defaults but none of the loans to date have defaulted.
The cause of falling rates of home ownership hasn’t been very well researched but Kiwibank’s experience suggests the reasons are more complex than simply the difficulty in saving a deposit, Tripe says.
Kiwibank spokesman Bruce Thompson says at the beginning people had unreasonable expectations of what the scheme could do for them, particularly in the Auckland, Wellington and Christchurch markets partly because $150,000 didn’t get them far.
The scheme has worked much better in provincial centres where average house prices are much lower, Thompson says.
