Housing Minister Chris Bishop announced yesterday that Kainga Ora was no longer accepting applications for the grant and a message on the government housing department’s website says the cut-off date for new applications was 1pm yesterday.

Mortgage advisers were caught on the hop. “The turnaround time was quick – with no notice,” Jeremy Andrews, Whangarei-based Key Mortgages director and mortgage adviser says. “It’s not good.”

Andrews had already had chats with several clients about what the move means and its implications. 

The scheme had paid out grants of $3,000-5,000 for an existing home, or $10,000 for a new build, to first-home buyers whose income was less than $95,000, or $150,000 for a couple or household. There were also price caps for the houses first home buyers could purchase according to regional prices.

Andrews says the scrapping of the scheme is ill-timed and will have a major effect, particularly for those home buyers who had already applied for it but not been given approval yet. “They will be on tenterhooks.”

“Those who have been given approval recently will be okay as the grant approval lasts for six months,” he says.

His firm routinely got all first home buyers who qualified to apply for the grant. None were turned down. “In regional areas, it often made the difference if those buyers were right on the cusp of having enough for a deposit.” Most banks require a minimum of at least 10%.

Andrews says using the grant to get to a 20% deposit was even better because it altered the maximum mortgage a bank approved and the interest rate offered.

“The grant could make the difference between a buyer having a 20% deposit or being a low deposit borrower forced to pay a low equity margin, which pushes interest rates up.”

He says the grant was essential for many buyers, so scrapping it will make a huge difference as to whether they have to spend longer saving for a deposit or can afford to buy when they want to.

The contributions to new home owners were worth about $60 million a year.

Housing Minister Chris Bishop says the Government is spending billions upon billions a year on housing support, and so “we're having a good look at all of those programmes."

Meanwhile, data from Inland Revenue show 3,320 first home buyers withdrew more than $129 million from KiwiSaver, down about $14.6 million compared to March when $143.7 million was taken out, but up from $73.3 million in April last year.