Aspiring first home buyers living in high-priced regions will be able to apply for a shared equity loan from the government from 2 July 2008, Housing Minister Maryan Street has announced.

"Under the two year pilot scheme, announced in May and launched tomorrow, Housing New Zealand will provide the interest-free Shared Equity loan and Kiwibank will provide the home loan.

"Up to 700 loans will be available under the $35 million scheme which will operate in Auckland, Wellington, Nelson, Christchurch and Queenstown," she said.

"Housing New Zealand has already received about 750 inquiries and 400 information requests from prospective home buyers. From tomorrow, applications will be processed and loans allotted at the end of each month, beginning July 31."

If the numbers exceed supply, successful applicants will be determined by ballot. However to help increase the new supply of affordable homes, applications to build or buy a new home will bypass the ballot, Maryan Street said.

"A Shared Equity loan is an interest-free loan from the government, topping up a Kiwibank home loan and home buyers’ own deposits. It means they don’t have to borrow as much from the bank. They still have to make regular repayments on their home loan from Kiwibank, but their Shared Equity loan does not need to be paid back until the home is sold or their Kiwibank loan term ends – although there are incentives to repay the Shared Equity loan earlier."

While house prices are currently flattening, unprecedented increases over the past few years have locked people who would normally have been able to afford a first home in earlier years out of the market, Maryan Street said.

"The scheme will be limited to those with a household income of between $55,000 and $85,000, who meet certain criteria. A maximum house price cap, which will vary across the targeted regions, will apply and this will move with the market."

The pilot scheme will be monitored and evaluated after two years, with further decisions taken on the use of Shared Equity at that time, Maryan Street said.

Full details are available here.

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