The housing market is always a hot topic of conversation around the office ‘water cooler’ or among family and friends; each month sees new updates for buyers to digest and work out how they could take advantage to achieve their home ownership goals.
While you may have glazed over with all the Government budget chat last month, one of the many announcements brought good news for first home buyers in the form of changes to the First Home Loan and Grant schemes. We’ll discuss these changes soon, but the intention is that many more will now qualify for the mortgage help these programmes are meant to provide.
In further positive news, the start of June saw the Government confirm they will loosen the Credit Contracts and Consumer Finance Act (CCCFA) rules, so we’ll share some detail around this too.
First Home Loans
The big change here was the removal of house price caps entirely from the First Home Loan scheme, to provide a greater choice of homes for prospective first home buyers. The aim of this programme is to make it easier for you to get into your first home by lowering the required deposit to 5%.
These loans are issued by selected banks and other lenders and underwritten by Kāinga Ora, with certain criteria including income caps which use your previous 12 months of earnings, not your current salary (important to note):
- $95,000 or less before tax for an individual buyer
- $150,000 or less before tax for an individual buyer with one or more dependents
- $150,000 or less before tax for two or more buyers, regardless of the number of dependents.
First Home Grants
If you’ve been making a minimum of three years’ worth of payments to your KiwiSaver (or another complying fund), you may be eligible for the First Home Grant when purchasing your first home.
While house prices over the last 12-24 months have meant that many couldn’t take up this opportunity, as the caps were lower than most sale prices, the caps have now been raised across the country by varying amounts. You can check out the new cap for your region here.
Income caps and KiwiSaver contribution requirements also apply here, but the Grant means that if you buy an existing home, you may be eligible for $1,000 for each of the three (or more) years you’ve paid into the scheme. The most you can get is $5,000 for five or more years per person.
If you buy a brand-new home or some land to build on, you may be eligible for $2,000 for each of the three (or more) years you’ve paid into the scheme. The most you can get is $10,000 for five or more years per person.
On the CCCFA
On 9 June, the Government confirmed it will loosen the CCCFA rules, publishing updated regulations and a new Responsible Lending Code, both of which will come into force on 7 July.
The aim is to remove the risk of lenders interpreting the regulations too conservatively and closely analysing borrowers’ spending habits. At Total Mortgages, over the last six months we haven’t seen much impact from the CCCFA on lending approvals (despite what the media says), however this is still good news for borrowers.
These changes do point some way towards the market opening up for first home buyers. While there are always other factors at play such as rising interest rates, we continue to work with many prospective borrowers to secure finance for their new home, with no sign of the predicted market ‘drop-off’ just yet.
If you’re looking to enter the market, we always recommend getting a good team around you; it goes a long way in smoothing out the process. That includes your mortgage broker (Total Mortgages of course!), a trusted solicitor and a real estate agent who understands what you’re looking for; we’d recommend engaging one to act as a buyer’s agent for you.
Reach out to our team if you’d like to talk through any of these market developments, to find out how they might aid your home buying plans.