Progress on leaky homes - English

Negotiations with banks to lend leaky home owners money for repairs are going well, Finance Minister Bill English says.

The leaky homes crisis followed deregulation of the building industry, where a resulting lack of rules meant problems with design and products left thousands of homeowners with ongoing problems.

Issues included flaws in design, product, cladding, workmanship, rules and checks.

Under the Weathertight Homes Resolution Services (Financial Assistance Package) Amendment Bill, the Government and local authorities would each contribute 25 percent of agreed repair costs, with affected homeowners funding the remaining 50 percent backed by a government loan guarantee. The bill has had its second reading.

"The terms the Government laid out quite some time ago now haven't significantly changed," Mr English told reporters today.

"There's been a lot of negotiation but the key idea is that there's some loss sharing and I gather we're making very good progress on it."

The New Zealand Bankers Association previously raised concerns about the loan guarantee, saying the term was misleading.

"People would normally think of a guarantee as standing in the shoes of the borrower. What is actually on the table is not that, it's more in the nature of a loss-sharing agreement," chief executive Sarah Mehrtens said.

The 50 percent provided by the Government and local authorities would be calculated into banks' lending criteria, but there was no separate guarantee for the 50 percent the homeowner would have to fund.

Mr English said the danger of loan defaulters was an issue.

"The Crown's been interested in working with the banks of course who have their own risks, that they have security on a home that may not have the value that they think it has backing the mortgage.

"So we've been looking at loss-sharing arrangements. The Government's been keen to help a bit, help with the problem but share with the banks the job of making sure that the money is well spent."

Mr English said the Government had provisioned a "pretty substantial contribution" into the scheme in last year's budget.

"We think we're pretty well covered, the idea of giving homeowners this option was to help a lot of them get on and solve their problem, rather than sitting and waiting and hoping that something would happen."