And just like that, the First Home Grant scheme is no more.
Government made the announcement earlier this week, with final applications closing at 1:00pm that same afternoon.
The scheme has been in action since 2010, offering eligible first-home buyers a cash boost towards their house deposit—up to $5,000 per borrower on existing homes and $10,000 on new builds.
The move will save roughly $245 million over the next four years. Of that, $140 million will be dedicated (as part of Budget 2024) to developing 1,500 new social housing units, helping provide warm, dry housing to Kiwi who need it most.
So, let's review: is removing the First Home Grant bad news for first-home buyers?
At first glance, it sure looks that way – but in my view, the actual impact is likely to be fairly minimal. That’s because the eligibility criteria meant a significant number of first home buyers missed out anyway.
To be eligible to receive a First Home Grant, household income had to be less than $95,000 for an individual, or $150,000 combined for two or more buyers.
Regional house price caps also applied. In Auckland, for example, you had to buy for $875,000 or less (existing or new build). In Wellington, the number was $750,000 for an existing property and $925,000 for a new build.
With the average house price across those regions sitting at $1.28 million and $1.01 million*, respectively, even after recent falls, the price caps were limiting.
For those who *did* tick the right boxes, the size of the grant itself meant it generally wasn’t enough to make the difference between getting into their own home or not.
In other words, if the goal was to increase homeownership (which it was), then the scheme didn’t really deliver on that. So, it was hard to justify the investment.
While some will be disappointed at missing out on the extra cash, the call to get rid of the First Home Grant makes a lot of sense.
For first-home buyers who do need support, there are still some great options out there
1. Kāinga Ora's First Home Loan Scheme
The First Home Loan Scheme is designed to help lower-income households buy a home with as little as a 5% deposit.
First Home Loans are issued by selected banks, building societies, and credit unions. The loans are underwritten by Kāinga Ora, which is why these lenders are comfortable taking on borrowers that fall outside their normal lending standards.
Certain eligibility criteria (like those same income caps) still apply.
While it’s not extra cash in the bank towards a house purchase, it is an extremely effective tool for helping those who otherwise wouldn’t be able to buy into their own home.
To find out more about the Kāinga Ora First Home Loan scheme, you can check out the Kāinga Ora website.
2. Launchpad
Squirrel’s Launchpad is another great option for buyers who are good earners (so don’t qualify for the First Home Loan) but have struggled to build up their deposit.
It’s designed to help you get across the line with as little as a 5% deposit saved – with Squirrel topping you up to 20%, and the rest of your mortgage funded through one of our non-bank partners.
To be eligible you’ll need to be a first home buyer who's managed to save up a genuine 5% deposit (including KiwiSaver), intend to live in the property, have stable long-term employment and be buying in a metro location. You can read up more about Launchpad here.
If you’d like to find out more about the support available to first home buyers, get in touch to chat with one of our friendly team today.
* Average house price data sourced via QV.