Shared Equity pilot kicks into gear tomorrow

30 June, 2008

Shared Equity pilot kicks into gear tomorrow

Aspiring first home buyers living in high-priced regions will be able to apply for a shared equity loan from the government from tomorrow, says Housing Minister Maryan Street.

“Under the two year pilot scheme, announced in May and launched tomorrow, Housing New Zealand will provide the interest-free Shared Equity loan and Kiwibank will provide the home loan.

“Up to 700 loans will be available under the $35 million scheme which will operate
in Auckland, Wellington, Nelson, Christchurch and Queenstown,” she said.

“Housing New Zealand has already received about 750 inquiries and 400 information requests from prospective home buyers. From tomorrow, applications will be processed and loans allotted at the end of each month, beginning July 31.”

If the numbers exceed supply, successful applicants will be determined by ballot. However to help increase the new supply of affordable homes, applications to build or buy a new home will bypass the ballot, Maryan Street said.

“A Shared Equity loan is an interest-free loan from the government, topping up a Kiwibank home loan and home buyers’ own deposits. It means they don’t have to borrow as much from the bank. They still have to make regular repayments on their home loan from Kiwibank, but their Shared Equity loan does not need to be paid back until the home is sold or their Kiwibank loan term ends – although there are incentives to repay the Shared Equity loan earlier.”

While house prices are currently flattening, unprecedented increases over the past few years have locked people who would normally have been able to afford a first home in earlier years out of the market, Maryan Street said.

“The scheme will be limited to those with a household income of between $55,000 and $85,000, who meet certain criteria. A maximum house price cap, which will vary across the targeted regions, will apply and this will move with the market.”

The pilot scheme will be monitored and evaluated after two years, with further decisions taken on the use of Shared Equity at that time, Maryan Street said.

Key Elements of the Shared Equity Pilot Scheme

The scheme:

- All applicants must meet Kiwibank’s standard lending criteria for a home loan and be able to make the regular payments on the amount borrowed.

- Applicants must approach Housing New Zealand in the first instance.

- If there are more eligible people than loans, Housing New Zealand will operate a ballot system, to be run monthly for each region.

- Building and buying new homes will be prioritised and will bypass the ballot system.

- Is available in: Auckland, Wellington, Nelson, Christchurch, and Queenstown.

- Involves the provision of a loan worth between five and 30 per cent of the value of the house (depending on the region);

- Imposes a price cap on eligible houses in each of the five regions;

- Is accessible to families with a household income of between $55,000 and $85,000 (gross), who can service a mortgage;

- Is accessible to families with a deposit of at least 5 per cent of the value of the home they wish to purchase, who could not otherwise afford 100 per cent mortgage/home loan on a house in the lower quartile;

- Requires people to live in the home they purchase;

- Is accessible to first-home or ‘second chance’ buyers (households who have owned a house previously but are in a similar position in terms of assets and incomes as first-home buyers).

ENDS