Banks postpone mortgage diversion applications
25 June 2008
Banks postpone mortgage diversion applications for Kiwisaver
New Zealand banks have postponed accepting applications from customers to use mortgage diversion contributions for Kiwisaver accounts, while proposed amendments to the rules for Mortgage Diversion are considered.
"The KiwiSaver regulations prohibit contributions in the KiwiSaver scheme being diverted to mortgages that involve revolving credit arrangements," New Zealand Bankers Association Chief Executive Alan Yates said. (See Section 23)
"Many mortgage agreements also cover the use of credit cards or bank overdrafts, as well as providing a conventional or revolving credit home loan on a residential property. These agreements are therefore caught by the exclusion."
"The good news is that the Inland Revenue is working with the Association on proposed amendments to change the regulations. However the regulations won't be changed in time for the original launch date of 1 July."
"The banks have decided that it will be simpler and easier for everyone if applications to use the mortgage diversion provisions are not accepted until August," Mr Yates said.
"The Inland Revenue is trying to get the new regulations through in July to meet with this timeframe and we don’t think that this delay will affect many customers."
"The regulations say the date of eligibility for a contributor to KiwiSaver is twelve months after the first contribution has been received by either the Commissioner of Inland Revenue or the scheme provider - whichever is the earlier. (Section 229) The number of eligible people whose first contribution would have been received by the Inland Revenue or their Scheme provider in July 2007 and who would have met the other Mortgage Diversion requirements is believed to be low."
“With the change in regulations expected in July, we’ll be keeping the situation under review during that time,” Mr Yates said.