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Govt may raise KiwiSaver home buyer deposit subsidy if RBNZ introduces loan restrictions

First home buyers face possible limits from one arm of government - and a leg up from another. Huh? Housing Minister Nick Smith explains ... PLUS: Bankers association raises loan shark fear.

NBR staff
Sun, 21 Jul 2013

Housing Minister Nick Smith has told TV ONE’s Q+A programme that the Government will review the current KiwiSaver maximum house price cap subsidy to better reflect the cost of housing, specifically in Auckland.

“We’ve had eight times the number of New Zealanders take their KiwiSaver – their savings, their employer contributions – pick up the Government’s grant and buy into the housing market," Dr Smith said.

"There are some things that we can do with KiwiSaver.  I’m worried that the income thresholds and household thresholds have not been shifted for some years, and as a consequence, that’s a barrier.  I’m having a fresh look at that, and we may make some moves in parallel with the Reserve Bank around where those thresholds are to make it easier for home buyers as we try and deal with this bigger problem."

The Reserve Bank is currently reviewing its options in efforts to try to cool Auckland’s housing market. It’s proposing introducing a loan-to-value ratio (LVR), forcing banks to restrict the number of loans it approves with deposits less than 20%.

Dr Smith told political editor Corin Dann that the Government had made it clear to the Reserve Bank that “home ownership’s a really important issue for us” and he was confident that “we’re going to get a package that works well for both the NZ economy and for those aspiring young families that want their own home”.

The Minister says that Aucklanders, in particular, found it difficult to access the start-up help for Kiwisaver because the price cap subsidy was restricted to houses $400,000 or less.

“I’m having a fresh look at that.  I think it is important that those levels are realistic and need to respond to some of the changes that have occurred in the market. KiwiSaver, of course, helps the concerns that the Reserve Bank Governor has, because he’s worried about people going in with zero, 5% – very low deposits on homes.  If we’re able to get KiwiSaver working, get people’s deposits built up, then he is comforted by the fact that there are less of those very risky mortgages – 95%, 100%,” Dr Smith said.

Bankers Association raises loan shark fear
Meanwhile, the head of the Bankers’ Association, Kirk Hope, has expressed concern that if the RBNZ introduces loan restrictions it will simply force desperate house buyers and small businesses to borrow off higher interest rate lenders, or loan sharks, to build the required deposit.

“It’ll not just be first home buyers, but it might be small businesses that are trying to access additional capital.  High LVR loans will reduce from around about 60 per cent, so what you’ll see is quite a reduction in the demand by restriction for those types of loans,” Mr Hope says.

“What you’ve seen in places like Canada, who have applied these caps, and Sweden, where these caps have been applied as well, is those first home buyers accessing the unsecured lending market to get the value of the deposit.”

Mr Hope says the RBNZ needed to justify why imposing a loan-to-value ratio tool was necessary.

“For example, we’re seeing lending flows declining, high LVR lending flows declining for the last quarter, housing approvals are declining, the rate in growth of housing approvals is declining, so all the figures are pointing to much more than just a seasonal change.  So what we would want to see out of the Reserve Bank is much more justification,” Mr Hope says.

Mr Hope says he would support the Government raising KiwiSaver access to help first home buyers in tandem with any LVR restrictions imposed by the RBNZ.

NBR staff
Sun, 21 Jul 2013
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Govt may raise KiwiSaver home buyer deposit subsidy if RBNZ introduces loan restrictions
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