Kiwisaver may bleed more loan deposits

The New Zealand Government is considering making it easier for first home buyers to withdraw more from their state subsidised retirement schemes to use as deposits to buy their first homes.

The Government is grappling with a political backlash from an imminent decision by the Reserve Bank of New Zealand to restrict growth in low deposit lending, which many political critics have said will hit first home buyers the hardest.

Prime Minister John Key had pushed over the last month for the Reserve Bank to exempt first home buyers, but RBNZ deputy governor Grant Spencer scotched the hopes in a June 27 speech saying such an exemption was not being considered.

Housing Minister Nick Smith told TVNZ's Q+A programme on Sunday the government was looking at lifting the income and house price thresholds for first home buyers who want to withdraw money from their KiwiSaver schemes to use as a deposit.

Currently, a saver can only start withdrawing their own contributions and their employers's contributions after three years in the scheme. They are also entitled to a NZ$1000 government subsidy for every year they have been in the scheme up to a maximum of NZ$5000 per buyer for savers in the scheme for five years.

The KiwiSaver scheme started in 2007, meaning KiwiSaver withdrawals started in earnest last year. A couple can withdraw their own savings and receive NZ$10,000 of additional subsidy. Government figures showed 10,733 first home buyers withdrew NZ$120.2 million last year, more than double a year earlier. There were a further 4,488 subsidies worth NZ$15.7 million given to first home buyers in 2012, up from NZ$9.5 million the previous year.

Kiwisavers can only apply for the subsidy if their combined income is less than NZ$100,000 and they are buying a house for less than NZ$400,000 in Auckland, Wellington, Christchurch and Queenstown, and for less than NZ$300,000 elsewhere.

"I'm worried that the income thresholds and household thresholds have not been shifted for some years, and as a consequence, that's a barrier," Smith told Q+A.

"I'm having a fresh look at that, and we may make some moves in parallel with the Reserve Bank around where those thresholds are to make it easier for home buyers as we try and deal with this bigger problem," he said.