Bank of New Zealand Chief Executive Andrew Thorburn has told interest.co.nz discussions between the banks and the government over the leaky homes issue are ongoing and "not logjammed".

The banks have been in discussions with the government about the Leaky Homes support package through the New Zealand Bankers Association (NZBA) since mid May.

The central government announced then that it would pay for 25% of the costs of fixing or rebuilding a Leaky Home, while local government would pay for 25% and the homeowner would pay for the other 50%. But the package was dependent on home owners borrowing from their banks using existing lending criteria, even though the loan would be backed by a government guarantee.

The problem is many home owners are not in a position to borrow more using existing criteria because they are either already heavily indebted or there is little or no equity left in the property to back a loan.

Thorburn said the discussions were focused on what form the government guarantee for the loan would take and "what sort of arrangements there might be to share potential losses."

He said the discussions were ongoing and while a result was not due within days he hoped it was not months away.

See more background on this issue here in Gareth Vaughan's piece from August 12.

If, as government officials forecast, 70% of affected homeowners within the 10-year liability limit took up the offer, the government expected taxpayers’ share of the bill for fixing leaky homes to be about NZ$1 billion over the next five years.

This means the banks face stumping up billions of dollars in loans and/or equity to break the logjam stopping leaky homeowners from repairing or rebuilding their houses.

The government wants to have the package available to leaky home owners by early next year. A PricewaterhouseCoopers report commissioned by the government last year estimated between 22,000 and 89,000 homes were leaky. PwC said a consensus forecast suggested 42,000 dwellings were likely to be leaky homes and noted only about 3,500, or 8%, had been repaired. PwC estimated the total cost of fixing 42,000 leaky homes, including repair and transaction costs, at NZ$11.3 billion in 2008 dollar terms.

The NZBA's members include ANZ, ASB, BNZ, HSBC, Kiwibank, the National Bank, Rabobank, TSB and Westpac.

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