Loans for first home buyers cut

Labour says Budget cuts to Welcome Home Loan funding will mean low-income earners will miss out on home ownership.

Friday, June 1st 2012, 12:00AM

by Susan Edmunds

Housing spokeswoman Annette King said the Government's claims that the need for the scheme had dropped because of low interest rates and a higher rate of bank lending did not hold water.

Funding for Welcome Home Loans, in which loans up to $350,000 to borrowers with joint incomes below $85,000 annually are underwritten by the Government, has been cut from $7.8 million to $4.3 million.

The scheme allowed borrowers to take out mortgages up to $200,000 without a deposit and with a small deposit over that amount. In smaller centres, the amount that could be borrowed was limited to $280,000 but in areas such as Auckland, with higher house prices, up to $350,000 was available.

The scheme had been credited with driving demand for properties in the $100,000 to $200,000 price bracket in particular.

But King said the cut meant many people would have to kiss their dreams of home ownership goodbye.

"There are always going to be people who would have got Welcome Home Loans whom the banks find it harder, or are more reluctant, to lend to. If you've got a couple of good incomes, you aren't going to be interested in a Welcome Home Loan. It's the people on the margins."

She said the decision to cut funding had been made without consultation. "Are they saying low interest rates are the new norm? That would be great but I think it's out of John Key's control."

But the Department of Building and Housing said only half the available funding was used for Welcome Home Loans in 2011/2012. Some the funding cut would be used to support the KiwiSaver housing deposit subsidy.

Kiwibank spokesman Bruce Thompson said the bank could understand the decision. "The Welcome Home Loan programme is a very good one and very successful. We are keen to promote it and to help people get over the hurdles and water jumps that can stop them buying homes/ But we also understand the overall objectives of the Budget."

Kiwibank has been involved with the scheme since it was first announced in 2003.

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