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Options for buyers locked out of scrapped first home loan grant

A privately funded financial services company has picked up the slack left after the government scrapped the first home loan grant and set up an alternative scheme.

Wednesday, June 5th 2024, 10:41AM

The platform Area is designed for first home owners to open investment accounts for saving towards a home deposit. It is offering $10,000 in credits redeemable for a first house deposit.

The savings products, which have targeted annualised returns of up to 7.15%, unlock Aera’s Deposit Credits programme, giving first-home buyers a $10,000 ‘head start’ toward their first home deposit.

Founder Auckland-based entrepreneur Derek Handley says the government’s $10,000 first home grants made a massive difference to tens of thousands of New Zealanders, and many more would have been planning to use it in the coming years.

First-home buyers (FHBs) can access Aera’s head-start credits by signing up to one of its savings products, unlocking $500 upon signing up to the new plan. Customers can then unlock credits over the course of their savings journey through hitting savings milestones and completing learning modules, up to the possible $10,000.

Unlike the government grants, which had regional price caps on new homes and incomes, Aera’s programme is for all first-time home buyers.

It is aiming at 5,000 accounts as a starting point. “We are rolling the full programme out over the coming months and there are a lot of developments to come, but the ultimate goal is to support first-home buyers into their first house irrespective of how far they are into their savings journey,” Handley says.

“We want to go further than the government scheme by providing savings products, education and motivation to give Kiwis the best chance at hitting their goal.”

The pilot scheme will be available to 5,000 first-home savers initially, representing a significant proportion of the yearly First Home Grant recipients.

Grant’s demise a good thing

Meanwhile Squirrel Mortgages founder John Bolton says the government’s removal of the first home loan grant looks at first view to be bad news, but the actual impact is likely to be fairly minimal.

That’s because the eligibility criteria meant a significant number of FHBs missed out anyway.

To be eligible to receive the grant, household income had to be less than $95,000 for an individual, or $150,000 combined for two or more buyers.

Regional house price caps also applied. In Auckland, for example, buyers had to purchase for $875,000 or less (existing or new build). In Wellington, the number was $750,000 for an existing property and $925,000 for a new build.

“With the average house price across those regions sitting at $1.28 million and $1.01 million, respectively, even after recent falls, the price caps were limiting.

“For those who did tick the right boxes, the size of the grant itself meant it generally wasn’t enough to make the difference between getting into their own home or not.”

Bolton says while some will be disappointed at missing out on the extra cash, the call to get rid of the grant makes a lot of sense.

He says for FHBs who do need support, there are still some options.

1. Kāinga Ora's first home loan scheme

The scheme is designed to help lower-income households buy a home with as little as a 5% deposit. First home loans are issued by selected banks, building societies, and credit unions and underwritten by Kāinga Ora, which is why these lenders are comfortable taking on borrowers that fall outside their normal lending standards. Certain eligibility criteria (like those same income caps) still apply.

While it’s not extra cash in the bank towards a house purchase, it is an extremely effective tool for helping those who otherwise wouldn’t be able to buy into their own home.

2. Launchpad

Squirrel’s Launchpad  is another option for buyers who are good earners, don’t qualify for the first home loan, but have struggled to build up their deposit.

It’s designed to help buyers get across the line with as little as a 5% deposit saved, with Squirrel topping up to 20% and the rest of the mortgage funded through one of its non-bank partners. 

To be eligible buyers need to be a FHB with a genuine 5% deposit, including KiwiSaver, intending to buy in a metro location and to live in the property, and who have stable long-term employment.

Tags: first home buyers

« First home buyers making hay, investors MIA Market could be near a tipping point »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 ▼6.85 ▼6.49 ▼6.35
ANZ 8.64 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
ASB Bank 8.64 ▼6.85 ▼6.49 ▼6.35
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - ▼6.85 ▼6.49 ▼6.39
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.45 ▼7.09 ▼6.99
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼6.59 - -
Co-operative Bank - Owner Occ 8.40 ▼6.79 ▼6.49 ▼6.35
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.29 ▼6.99 ▼6.85
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 ▼6.69 ▼6.35 ▼6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 ▼7.50 ▼7.25 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 ▼7.75 ▼7.39 ▼7.19
Kiwibank - Offset 8.50 - - -
Kiwibank Special - ▼6.85 ▼6.49 ▼6.39
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 ▼7.25 ▼6.90 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 ▼7.65 ▼7.29 ▼7.19
TSB Special 8.64 ▼6.85 ▼6.49 ▼6.39
Unity 8.64 ▼6.85 ▼6.49 -
Unity First Home Buyer special - ▼6.45 - -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.45 ▼7.09 ▼6.89
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.85 ▼6.49 ▼6.29
Median 8.64 7.07 6.85 6.39

Last updated: 24 July 2024 9:31am

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