Photo: Supplied/ Dan Bailey
The First Home Grant might be gone, but there are still options for people wanting to enter the property market, brokers say.
The government has scrapped the grant, which could provide buyers up to $10,000 if they bought a new build, and says it plans to redirect the money to social housing.
That prompted some would-be buyers to express concern that home ownership was further away as a result.
But is that the case? Here are some of the options available to first-home buyers, according to brokers.
A low-deposit loan
While a lot of focus goes on the need for a 20 percent deposit for a home loan, banks do lend to people with smaller deposits.
Data shows that about a third of first-home buyers are currently getting a home loan with less than a 20 percent deposit.
From 1 July, the amount of lending that banks can do to borrowers with these smaller deposits will increase to 20 percent. But most stick at a level a few percentage points to remain within the rules.
"First-home buyers use most of that," Squirrel chief executive said David Cunningham. "It's not like the door is shut."
Depending on market conditions, sometimes banks prefer a live deal - an offer accepted subject to finance or a buyer wanting to bid at auction - when they are offering preapproval for a borrower with a sub-20 percent deposit. But that is not always the case.
When demand was high and banks were worried about pushing up against their limits, they might be less likely to offer a preapproval, Cunningham said.
"They don't want a whole lot of preapprovals in the pipeline that eat up capacity with no guarantee a deal will follow. But in an environment like today when they are miles below those levels, banks will give you a preapproval."
He said when things were tighter banks might also favour their existing banking customers.
Loan Market adviser Karen Tatterson said she recently helped a buyer who needed a 90 percent loan. Banks were keen to make it known they were open for business for first-home buyers, she said.
KiwiSaver
Many people's KiwiSaver balances are now getting to the level where they can provide a significant amount of deposit.
In April, $129.1 million was withdrawn from KiwiSaver by 3320 people, or just under $40,000 each.
"We very rarely see a first-home buyer that's not withdrawing KiwiSaver for the bulk of their deposit," Cunningham said.
Parent support
Cunningham said many buyers were also helped by their families.
"The 'bank of mum and dad' has always been in existence. I got my loan from the bank of mum and dad 30 years ago. The current generation thinks it's unique to them but it's always been there."
Saving
Cunningham said many people also had their own savings to contribute.
In most cases five or six months of saving could replace the grant, he said.
"The First Home Grant was a bit of icing on the cake for some people. I describe it as doing a scratchie, 'oh I won $5000' or 'oh, I won $10,000' but it's not the thing that made the difference in most cases.
"We see an enormous number of first-home buyers and there are very few where it was the difference between being able to buy a house and not buy a house. For most, it was unnecessary - nice but it didn't make any real difference."
Tatterson said many people she dealt with had been constrained by the income and price caps for the grant, anyway.
"They are purchasing at more than the threshold. A lot of those people are earning more than the threshold for First Home Grants - the big problem I saw was that people assumed it was their base income but by the time you add bonuses or overtime, people on the cusp were over the $150,000."
First Home Loan
Cunningham said people should also remember the First Home Loan scheme was still functioning.
This allows banks that participate in the scheme to issue loans to borrowers who meet their lending criteria, but can have a deposit as low as 5 percent.
Kāinga Ora underwrites the loan. Borrowers need to have income as a single person of $95,000 or less, and $150,000 as a couple or buyer with dependants.
A fee is charged by Kainga Ora but Cunningham said it was often worth it, because it meant banks could treat those loans as if they had a 20 percent deposit, and offer the buyers the special rates that would usually only be available to people with more deposit or equity.
"The bank treats it as if it was below 80 percent so the borrower gets the below-80 percent interest rate. That's a huge benefit. The fee is roughly 1 percent for an 80 percent to 90 percent loan, so about $5400 on a $540,000 loan, but if you get the lower interest rate on the bank, if it saves you 0.6 percent you recover that in a year. If it's a 90 percent loan it's a bit higher but again you get the lower interest rate because of that. That's a huge benefit."
Tatterson said it was disappointing that the First Home Grant was gone but she was encouraging people to get into the market if they could.
"I say to my first-home buyers, if you can afford to do it now when rates are what they are, if you can manage your budget, it's only going to get better for you.
"As they mature their salaries are going to go up and interest rates are going to go down and it will become more affordable. If they get in now before property prices start to escalate, that's advantageous for them as well."
