Nearly $950 million was lent to home buyers with less than a 20% deposit in March.

It was significantly up on the $584 million lent to low deposit borrowers in March last year and $510 lent by banks in March 2023.

First home buyers were responsible for 78% of all low deposit borrowing by owner-occupiers.

Banks are able to lent 20% of their total mortgage lending to borrowers without a 20% deposit and first home buyers have taken advantage of this. They have often used KiwiSaver to top up their savings for a deposit. 

During April just over $167 million was withdrawn by nearly 4,000 KiwiSaver members for a first home deposit. That was 650 more first home buyers using KiwiSaver than at the same time last year.

This means about two in five of all first home buyers are getting into the property market with less than 20% deposit.

Cotality chief property economist Kelvin Davidson says first home buyers are still a strong presence in the market and accounted for 27% of all purchases last month.

“This continues their run of above average market share, which has usually been about 21-22%.”

Although the share of home buying by investors remains below normal, Davidson says they are coming back into the fray. They were responsible for 24% of purchases last month, levels not seen since late 2021.

“This is consistent with falling mortgage rates, the easing of LVR rules in July last year and interest deductibility going back to 100% this year. “

Davidson says there is still some caution from banks and borrowers about the LVR rules.  Low deposit lending accounted for only 11-12% of the allowable 20% limit for owner occupiers.

“There may simply be less need for a high LVR loan as households’ cash reserves stretch further as a deposit for owner-occupiers,” he says.

About 60% of existing mortgages by value are due to be refixed over the next 12 months, mainly onto lower rates.

“Even though mortgage rates and banks’ servicing rates have fallen, loan sizes remain fairly low in relation to incomes, so DTIs are under control for both investors and owner-occupiers.”

Davidson says subdued house prices will be one factor limiting how much debt people need to take out.