New cost for first-home buyers
Photo:
RNZ
First-home buyers accessing the Kainga Ora-administered First Home Loan will pay a higher fee from 1July.
The scheme allows borrowers to access loans with a deposit as small as 5 percent, if they earn less than $95,000 as an individual without dependents or $150,000 as a couple or single parent.
These loans do not fall under the banks' loan-to-value rules and borrowers can usually access bank special rates and do not have to pay the low-equity fees and margins that could otherwise apply.
Previously, borrowers had to pay lenders mortgage insurance of 0.5 percent of the loan amount. But from 1 July, that increases to 1.2 percent.
Borrowers can pay it upfront or over the lifetime of their loans.
The change applies to loans submitted after 1 July.
A spokesperson for the Ministry of Housing and Urban Development said the government had agreed to cease its contribution to the mortgage insurance premium as part of the Budget.
"This change is expected to generate savings of $17.9 million per annum from 2025/26 onwards. These savings, along with others identified across the housing portfolio, will be fully reprioritised to support both existing housing services and the delivery of new initiatives within Vote Housing and Urban Development, including investments in social housing, transitional housing, and housing support services."
The ministry said for an average first home loan of $550,000 it would increase the premium paid by the borrower from $2750 to $6600.
"This cost can be paid upfront or added to the loan, which would increase the total borrowing by approximately $3850.
"HUD does not expect that moving to a full cost recovery model will materially affect the uptake of first home loans or households' ability to reach home ownership relative to current settings. The increase in cost is less than 1 percent of the average loan value and is not expected to significantly impact borrowers' ability to service their mortgage, meet deposit requirements, or access lending."
David Cunningham, chief executive at mortgage advice firm Squirrel, said it was a change that was "snuck in".
But he said it would not make a big difference to most borrowers.
"On a $400,000 loan that lifts the LMI from $2000 to $4800. Whilst the $2800 difference seems big, it is just part of the cost of establishing home ownership. Changes to interest rates are a much bigger factor as they impact every year rather than a one-off. With interest rates about 1.5 percent lower than they were a year ago and house prices a bit lower, first-home buyers are in a better position than a year ago, despite this change."
There were just over 5500 First Home Loans approved last year.
Jeremy Andrews, a mortgage adviser at Key Mortgages, said the change had come as a surprise.
"I've done a heck of a lot of Kainga Ora First Home Loans over recent years … a 0.5 percent fee was typically a no brainer even when clients could have been approved with their main banks [with a] low deposit outside the scheme.
"There are still cases where it makes sense as that's a one-off fee rather than typical ongoing margin until clients reach the sweet spot of 20 percent equity.
"It's also ironically the same 1.2 percent margin that BNZ charges their existing 'main bank' clients with between 5 percent under 10 percent deposit. BNZ, like most other banks, charges an ongoing low equity margin every year until clients can prove they have 20 percent deposit - and this might require an updated valuation to do so."
He said a benefit of the First Home Loan scheme was that people could usually be preapproved and it was sometimes possible to get higher cashbacks from banks.
"There are several different lenders who can provide preapproval with Kainga Ora First Home Loans, each with pros and cons such as considering either one or two boarders if applicable, turnaround time differences and varying rates and cashbacks. "
Karen Tatterson, Loan Market mortgage adviser, said the main banks were generally not issuing pre-approvals for low-deposit borrowers not part of the First Home Loan scheme at the moment.
"It means that the only time you can get an approval is if you are under contract on a property or going to auction on a specific property. It does cause a concern for first-home buyers as they cannot go to the market armed with a preapproval and this creates some nervousness for them. The key is good advice and ensuring they speak to an adviser so they know their numbers."
Sign up for Ngā Pitopito Kōrero, a daily newsletter
curated by our editors and delivered straight to your inbox every weekday.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RNZ News
2 hours ago
- RNZ News
Defence Force cuts 255 civilian roles to focus on front-line personnel
(File) NZDF is cutting 255 civilian roles to help it focus on front line personnel. Photo: Supplied / New Zealand Defence Force The Defence Force is cutting 255 civilan roles as part of a restructure. The agency said it is getting rid of 281 filled roles but establishing 276 new ones, meaning five currently filled positions will be axed. The remaining 250 jobs to be cut are currently vacant. The restructure was announced earlier this year , in March, when it was thought the net loss of roles would be about 370. In a statement, NZDF said the changes would help it focus on "maintaining combat readiness and delivering on core military activities". "In making decisions, the NZDF has consulted with staff and unions, and the feedback received has meant some changes that were initially proposed will not go ahead." Further consultation is still underway on alternative proposals, it said. "Throughout this process, the NZDF has ensured that as many staff as possible are placed into suitable alternative positions in the new structure." The Public Service Association said about 10 percent of the agency's civilian jobs were being cut and that the changes would increase already heavy workloads. This would lead to more stress and burnout, and force those in uniform to pick up the shortfall, it said. National Secretary Fleur Fitzsimons said the government was fooling itself if it thought cutting so many jobs was how to build a modern, combat-ready defence force, at a time of rising security risks. She was pleased the government was investing in military equipment and technology , but said it was blind to the fact that civilian defence workers - like engineers and IT specialists - were needed to support this. Fitzsimons said staff were told the tough fiscal environment has forced Defence to make deep cuts in a number of areas, including cancelling some training activities and major exercises; reducing flying hours, sea days and other training, and; pausing property maintenance. Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
3 hours ago
- RNZ News
'Greed' drove mum who stole $500,000 from employer and spent most on takeaways, judge finds
By Belinda Feek, Open Justice multimedia journalist of Ariana Thompson-Bell spent most of the money on clothing and fast food, her lawyer told the court. Photo: Supplied / NZME A woman who pilfered just under $500,000 from her employer says she spent most of it on takeaways and clothing. Ariana Thompson-Bell transferred legitimate payments into one of her four personal bank accounts over two years, and made deposits into her own daughter's bank account. Thompson-Bell was jailed on a charge of theft by a person in a special relationship in the Hamilton District Court on Monday afternoon. Her employer successfully appealed to have their name suppressed by Judge Tini Clark. The employer can instead be described as a "local work skills programme". In trying to break down Thompson-Bell's offending, Judge Clark quizzed counsel Christine Hardy about exactly what the stolen money was spent on. "It essentially went on funding a lifestyle that was beyond her means. "I'm talking about lots of money that was spent on things like clothing and fast food," Hardy said. Judge Clark pressed: "You'd have to buy a lot of fast food to spend $500,000 or thereabouts, wouldn't you, Ms Hardy. Was there travel, were there vehicles?" Hardy replied: "I don't believe there were any vehicles. And there was one transaction for Air NZ in the thousands of dollars, but by and large it was being spent in small but very frequent amounts." The offending happened between 2021 and 2023. Thompson-Bell's modus operandi was simple. Instead of paying legitimate invoices to service providers, she put the money into one of four accounts she had control of. In 2023, the chief executive started receiving letters from the IRD and other companies stating that payments had been missed. The CEO recalled recently authorising payments, so initiated an investigation and found "significant funds" being transferred into one of four bank accounts. One of the accounts belonged to a staff member, identified as Thompson-Bell. Police were informed, and examinations were done on her Kiwibank accounts. They found that between December 2021 and September 2022, $191,073 was transferred into her account. Between January 2021 and November 2022, she transferred $241,554.26 into her daughter's account, a further $63,800 into a third account, and $3500 into the account of a kōhanga reo. In total, Thompson-Bell stole $499,972.55. Since first appearing in court last year, a total of $66,355.93 has been repaid, which included about $40,000 from her mother. Hardy said that as soon as her offending was uncovered, Thompson-Bell attended a hui with her employer "face to face". "And she formally apologised and took responsibility." However, Judge Clark noted it wasn't as if Thompson-Bell suffered a "crisis of conscience", and fessed up to her behaviour - she was caught. At the hui, it was agreed that the money would be paid back. But Judge Clark said that was unlikely to ever happen, given she had so far paid back only about 13 percent of what she had stolen. Hardy urged the judge to get down to a sentence of 24 months, which was within range of home detention to allow her to continue to look after her five children. She explained that Thompson-Bell's husband was often away for work and would be unable to look after all the children himself. Hardy described the offending as "unsophisticated", as all she did was change the bank account number to which the money was being deposited. However, aggravating the situation for the judge was discovering that Thompson-Bell had just two years earlier qualified to work in finance when she began stealing. Judge Clark said the injection of those funds would have made a "significant difference" to the quality of her family's life. "To provide Ms Thompson-Bell a lifestyle that she desired and otherwise would not have been able to achieve from her own earnings ... clearly, Ms Thompson-Bell and her family have benefited from her dishonesty." The judge said she didn't have any information from the contractors affected, but it appeared as though her employer paid them and then adopted a prudent approach with its spending. Judge Clark said while the trust managed to meet its financial obligations, "that's all good and well, but it does occur to me that there's more than just one victim here". Trying to describe the impetus behind the offending, Judge Clark said one word came to mind, "greed". "This was not money taken for something essential, where it was a one-off occasion out of desperation or anything of the kind. This was a very warped sense of entitlement to money that she knew ... she was not entitled to." Judge Clark said the impact of Thompson-Bell's sentence weighed heavily with her and also the impact it would have on her children, but found a jail sentence was justified. She allowed discounts for the guilty plea, remorse, reparation, the impact on Thompson-Bell's children and previous good character. "I have had to be very clinical. From my perspective, I have done as much as I can, and, unfortunately, Mrs Thompson-Bell, it will be 27 months' imprisonment." -This story originally appeared in the New Zealand Herald .
RNZ News
6 hours ago
- RNZ News
The Panel with Andie McCombs and Kirsty Cameron Part 2
Is cash still king? NZ First thinks so, with a members bill looking to protect its use for all stores selling goods worth under $500. The panel speaks to a banking expert. Then, they head to Wanaka where a young entrepreneur is working hard to revive a little-known kiwi clothing brand.
