ASB offering 95% mortgages for KiwiBuild homes

Property

ASB joins Kiwibank with special deal for KiwiBuild home buyers, saying they'll 'potentially' only need a 5% deposit & get $2,500 towards costs

7th Sep 18, 11:04am by Gareth Vaughan

ASB says it'll provide loans to KiwiBuild home buyers who have just a 5% deposit and provide $2,500 cash contributions.

Claire McKinnon, the bank's acting executive general manager of retail banking, says ASB will give a $2,500 cash contribution to customers who take out an ASB home loan to purchase a KiwiBuild property, upon settlement of their loan.

“The $2,500 cash contribution is to help take away a layer of expense. For example, it can be used towards the costs of purchasing their new KiwiBuild home, such as a property valuation or legal fees,” McKinnon says.

"Plus, ASB will provide pre-approvals of up to 95% of the value of a KiwiBuild home for eligible customers, meaning participants may potentially only need a 5% deposit on their property," McKinnon says.

The Government has committed $2 billion for KiwiBuild, through which it aims to deliver 100,000 "modest starter" homes for first home buyers over the next decade. About 50,000 of these homes will be built in Auckland, and sold at prices up to $650,000. At the $650,000 top end of the KiwiBuild price range, a buyer getting a 95% mortgage would require a $32,000 deposit. There's more detail on KiwiBuild here.

ASB's announcement comes after Kiwibank last month said it will pre-approve mortgages for up to 90% of the price of KiwiBuild homes, and will also contribute $2000 towards buyers' moving or legal expenses.

McKinnon says ASB has also established a direct line to a specialist lending team for customers wanting to talk more about KiwiBuild. ASB’s lending criteria, terms and fees apply for the KiwiBuild loans.

Also see: The fact borrowing on the 100,000 KiwiBuild houses will mostly fall outside the LVR restrictions may force a rethink on macro-prudential policies.

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48 Comments

by RickStrauss | 7th Sep 18, 12:04pm 1536278677

95% mortgage for an affordable KiwiBuild house.

So, doing the sums...

House price: $650,000
Deposit: $32,000
Interest rate: 4.99%
Term: 25 years
Weekly: $831

Plus rates and insurances.

Wonder how affordable that's going to be for folk.

by BuyLowSellHigh | 7th Sep 18, 12:18pm 1536279522

For a couple on decent incomes, I'd say it is doable quite comfortably.

I think the reality is that combined deposit is likely to be higher than the 5% required ($32,000), particularly if they are drawing on their kiwisaver balances. Term would be 30 years and interest rate more likely be 4.25%. Would be paying less than $350/week each, which can be significantly offset by getting in a couple of housemates in to the other two bedrooms at $170/wk each (assuming this is allowed under kiwibuild purchase conditions). .

by Carlos67 | 7th Sep 18, 1:37pm 1536284238

Totally doable but you don't need a 30 year Mortgage, you save next to nothing over a 25 year or even a 20. You both need decent jobs, don't have any kids and its a walk in the park.

by RickStrauss | 7th Sep 18, 2:06pm 1536285987

That is a problem though, isn't it?

We make it so difficult for productive people to afford a life with children, to the point we'll end up resorting to importing more population at the low end and subsidising their viability from this couple's salaries.

by Dale Smith | 7th Sep 18, 2:37pm 1536287865

You are not thinking 'doable' enough.

Two bunks/four beds to a room , a pull out bed in the lounge, and hot bunking.

Not only affordable, but some serious commercial coin as well.

by Pragmatist | 15th Dec 19, 9:53pm 1576399989

by MisterB | 7th Sep 18, 4:23pm 1536294212

You're dreaming if you think the interest rate on a 90%+ loan will be 4.25%.

by kensinma | 10th Sep 18, 8:37am 1536525423

Yep current low equity margin for less than 10% equity is 1.30% on standard rates, so that makes one year rate 5.99%

by Pragmatist | 15th Dec 19, 9:53pm 1576400009

by BuyLowSellHigh | 7th Sep 18, 1:36pm 1536284190

650K for a brand new, 3 bedroom, stand alone house in Auckland isn't "attractive"? It's charity is what it is.

Upswing phase of the cycle is due 2021/22, so best not dilly dally.

by Carlos67 | 7th Sep 18, 1:39pm 1536284387

Its called government subsidized housing. The deal breaker is whether or not they actually build enough of them to make a difference.

by RickStrauss | 7th Sep 18, 1:43pm 1536284592

Indeed, that's the crux of it. If they can ramp up supply initiatives enough and if changes to other factors are put in place (e.g. ringfencing, or immigration volumes) it could be a powerful cocktail in two ways:

1. Direct effect on house prices
2. The 2020 election, where National will be forced to run on "We're going to dismantle everything to push house prices out of reach of young Kiwis, because investors want endless capital gains".

by BuyLowSellHigh | 7th Sep 18, 1:49pm 1536284945

Yes, agreed.

My expectation is that kiwibuild won't actually add much to the total number of houses built (kiwibuild will just be underwriting houses that would've been built anyway), but those that are built will be smaller and cheaper.

by Pragmatist | 15th Dec 19, 9:53pm 1576400032

by Dale Smith | 7th Sep 18, 2:33pm 1536287599

For them to offer this ONLY on Kiwibuild houses heavy suggests there is a subsidy or risk underwrite being covered somewhere in this.

What makes a Kiwibuild house less risky to fund that all the others?

And of course to qualify for a 5% deposit, you will have to show that you are so well qualified that in effect you don't need it.

Chances are, if you only have a 5% deposit, then you will be down the list of those that will qualify first by being able to pay more.

This is typical bait and switch marketing.

by Pragmatist | 15th Dec 19, 9:54pm 1576400041

by nymad | 7th Sep 18, 2:57pm 1536289079

Well, yes, the subsidy is the house itself.

This just shows that the banks perceive the Kiwibuild properties to be under priced / under true market value.
Hence the willingness to loan 95% because the risk is so low.
They sure as hell aren't going to be offering it on other new builds such as Pokeno or Kumeu.

by Pragmatist | 15th Dec 19, 9:54pm 1576400059

by pacifica | 9th Sep 18, 11:36pm 1536493016

They offer similar deals to other owner occupiers it is just they get more marketing as caring about NZ families by linking it with kiwibuild. Compare that alongside ANZ's having a home is an aspirational dream campaign and they seem to be well positioned for more NZders to be swayed by their marketing bollocks to sign up to 28 year mortgages of over half a million.

by Pragmatist | 15th Dec 19, 9:54pm 1576400070

by BuyLowSellHigh | 7th Sep 18, 4:44pm 1536295455

You strike me as the type that likes to virtue signal, so I’m surprised you’d comment that Papakura isn’t good enough for you. The houses looked well built and designed in all respects to me, although modest.

By “charit” I meant the government taking all the risk to build a house that the market wouldn’t, without taking any profit. There is a reason you need to enter a ballot (i’d call it a lottery) to buy one of them. Let’s check the Q.V. in 5-10 years time. The buyers will be very happy.

You seriously think house prices are going to come down so much that you’ll be able to wait and get a better deal than that in the future? Not going to happen. The opposite is true.

by Pragmatist | 15th Dec 19, 9:54pm 1576400086

by BuyLowSellHigh | 7th Sep 18, 4:54pm 1536296097

Southern motorway? There is a perfectly good train station in Papakura. $6.20 to the city. I think it has or is about to be upgraded actually. Hope you’re not too good for public transport as well.

For a better located property at that price you are in appartment or terraced unit territory.

by Pragmatist | 15th Dec 19, 9:55pm 1576400115

by BuyLowSellHigh | 7th Sep 18, 5:04pm 1536296681

I’d buy one of these kiwibuilds if they’d let me. Enjoy waiting for the crash that isnt coming.

by Pragmatist | 15th Dec 19, 9:54pm 1576400096

by BuyLowSellHigh | 7th Sep 18, 5:22pm 1536297741

If it was my first home, heck yes I’d live there. 5 years goes quick, then I’d most likely use the equity to move somewhere else and rent out the Papakura house. I lived in Conifer Grove as a child for a while - nice enough.

by BuyLowSellHigh | 7th Sep 18, 6:46pm 1536302789

Top notch house - https://youtu.be/kznRSvyHFC8

by pacifica | 9th Sep 18, 11:37pm 1536493071

You should look at the non-kiwibuild new SHA & suburb developments. Many have far worse quality. To say this is where the market is at now and the basic 90sqm 1950s homes with no land outside of the minimum fencing distance are now "aspirational" (not even a luxury), would not be far off. The old attitude around basic housing is just that old. Nowadays even having a dog box would be a mark of success. Having the land to put your dog box on would be in the upper tier.

by Shoreman | 8th Sep 18, 9:16am 1536354977

What happened to LVR ?? Obviously under valued for such a low deposit big lolly scramble !!

by Pragmatist | 15th Dec 19, 9:55pm 1576400126

by RickStrauss | 7th Sep 18, 1:40pm 1536284434

Just used the standard calculator on https://www.mortgagerates.co.nz

by Pragmatist | 15th Dec 19, 9:55pm 1576400137

by RickStrauss | 7th Sep 18, 1:52pm 1536285128

Good point, I should probably have used their calculator. Recalled there was some commentary out there about the faults of banks' various calculators so went to the other sites.

by Pragmatist | 15th Dec 19, 9:55pm 1576400154

by RickStrauss | 7th Sep 18, 2:04pm 1536285869

Ah, got it.

So, over 25 years it's $874 paid weekly, plus insurance, rates and maintenance. On a 20 year term it's $978 per week.

Stress tested at 7% over 25 years it's $1,006 per week.

I guess...this would encourage a low birth rate.

by MisterB | 7th Sep 18, 4:26pm 1536294412

Well, presumably any low equity premium only applies for the time it's low equity. If it's still low equity over 25 years, there's a bigger problem!

by Pragmatist | 15th Dec 19, 9:56pm 1576400172

by MisterB | 7th Sep 18, 4:41pm 1536295285

I guess that depends on whether they're undervalued or overvalued v market and how quick someone pays it down.. but it would be at least for 2+ years I imagine!

by pacifica | 9th Sep 18, 11:57pm 1536494231

Pity the site calculation is the easy part any calculator could provide. The actually useful part is how the bank assesses superstitions on assets, employment & job type, age, medical conditions (inclusive of family), and house location. You can be one of the best software engineers in NZ but if you are self employed, older, have plenty of cash and land assets, and plan to continue work from home in a new city the banks will still subject you to the ever increasing mortgage discrimination (likewise for people who would face the 90 day wait period which is longer than many contracts and student loans). Had that happen to a friend and they had to write a shameful begging letter to the mortgage dept stating their work experience, concrete income they could pull and all the non work from home jobs they could also access and they were still denied their first mortgage. Note to anyone else, go for a standard long term office job when younger and then once you get the mortgage go in for the edge case roles. Requests from kiwisaver are even worse for those using it for their home financing.

by THE MAN 2 | 7th Sep 18, 3:39pm 1536291579

Yes the KiwiBore houses at Papakura look cheap and nasty really.
Has anyone actually seen any photos of the living room?
Twyford said they were spacious open plan living and yet no photos.
The master bedroom photo seems to have a double bed that overlaps the window.
These may suit couples but forget about it for kids and no outdoor living!
Good luck if you buy one as they are going to be an absolute lemon!
Watch the moans and groans p!

by Retired-Poppy | 7th Sep 18, 4:00pm 1536292800

KiwiBore house = a warm and healthy compliant home vs a TM2 rental that's likely cold, damp and mouldy. These new and proposed WOF standards for healthier homes rile you don't they?

by MisterB | 7th Sep 18, 4:27pm 1536294466

Oh harden up. As we all know for a fact, Cantabs don't want heat. Their hatred for jaffas is more than enough heating

by pacifica | 9th Sep 18, 11:55pm 1536494154

Cheers for the laugh. Was going to mention the communal couch burning in Dunedin but yours was better. I guess Otago is just warmer in heart than Cantab. (Or it could be the vino and whiskey).

by THE MAN 2 | 7th Sep 18, 5:21pm 1536297703

RP, seriously all our properties would be far better than what I saw on TV at McLennan!
Not one is cold or damp and are all very well maintained by professional landlords.
I do feel sorry for people if they have to lay 650k for the boxes that I saw on pathetic little sections.

by Pragmatist | 15th Dec 19, 9:56pm 1576400204

by THE MAN 2 | 9th Sep 18, 4:00pm 1536465649

You are telling untruths Pragmatist.
All our properties are fully insulated!
The only one that isn’t we haven’t settled on and then that will be made fully compliant.
There is a helluva lot more capital gain in our portfolio than thousands of shoeboxes altogether in Auckland.
They are shocking for 600k but if that is what first home buyers think are value then they are deluded!

by Pragmatist | 15th Dec 19, 9:56pm 1576400215