22 May 2024

Stringent criteria blamed for lower than expected uptake of first home buyer grants

10:22 pm on 22 May 2024
Selling home ,Landlord and New home. The house key for unlocking a new house is plugged into the door. Mortgage, rent, buy, sell, move home concept

The government has scrapped the First Home Grants Scheme from today. Photo: 123RF

Stringent criteria are being blamed for a lower uptake in the First Home Grants scheme than expected.

The scheme provides eligible first home buyers between $5000 and $10,000 towards a deposit.

But the government is getting rid of it from today, with some of the money saved set to go towards delivering 1500 new social houses.

Finance and Mortgage Advisers Association country manager Leigh Hodgetts told Checkpoint a number of factors contributed to lower than expected numbers claiming the funds.

The stringent criteria for the grants meant their uptake was not as large as initially anticipated, she said.

The criteria included things like rules around income requirements and benchmarks on the values of the properties that were being purchased, she said.

"So it was a lot of criteria, a lot of boxes to be ticked to actually qualify."

It was also likely fewer people were eligible due to higher interest rates and increased housing prices, she said.

"I did some stats today, only about 40 percent of the applications that were submitted through the mortgage advisors were actually approved and the number ... was just over 12,000 across the country."

The grant scheme closed at 1pm on Wednesday, but Hodgetts said those applications which were pre-approved and were still in the system would be honoured.

The association was disappointed at the grants being cut, she said.

"They just helped people get into a home faster than they would have if they were you know having to save that balance of the deposit themselves."

She said they would be missed but because of the stringent application criteria and the grant was not available to all first home buyers.

Scrapping the grant meant that for some first home buyers it would now take them longer to save up to get into a property and they would likely end up renting for longer, she said.

"And that doesn't free up housing for new arrivals in New Zealand or for people to get into their home ownership perhaps as quickly as they could have if they'd been able to get a grant."

But even with the pressures of high interest rates first home buyers seemed to be doing okay at the moment, she said.

"The stats of the last quarter shows about 26 percent of lending that's been approved in New Zealand has actually been first home buyers."

Anyone who was looking to buy their first home should get some professional advice from a mortgage broker who could guide them through the process of approaching banks and applying for a loan, she said.

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