Half of first home buyer mortgages in June went to people with less than a 20 percent deposit

Just over half the New Zealanders who got a mortgage to buy their first home in June did it with less than a 20 percent deposit, and the low deposit end of the market is now doing almost all of the growing.

Reserve Bank lending figures analysed by interest.co.nz show 2,707 mortgages were approved to first home buyers in June. Of those, 1,358 were low equity loans, where the buyer had less than the 20 percent deposit banks traditionally ask for. That works out at 50.2 percent, back above the halfway mark after four months below it.

A decade ago the same figure sat under 30 percent. The share crossed 50 percent for the first time in January this year, slipped back between February and May, and pushed past the mark again in June.

The money involved has moved even faster than the loan count. Banks handed first home buyers $881 million as low equity mortgages in June, up from $218 million in June 2016, a more than fourfold increase over ten years. Lending to first home buyers who had at least a 20 percent deposit rose far more modestly over the same decade, from $520 million to $721 million, an increase of 39 percent.

Narrow the window to the last four years and the pattern gets starker. Total first home buyer approvals climbed from 1,885 in June 2022 to 2,707 in June 2026, a rise of 882 loans or 44 percent. Almost all of that growth came from one place. Low equity approvals went from 483 to 1,358, up 875 loans or 181 percent. Standard mortgages, the ones with a deposit of 20 percent or more, actually went backwards, from 1,402 to 1,329, a fall of 5.2 percent.

In other words, the entire increase in first home buyers getting into the market since 2022 is explained by people buying with a smaller deposit. The number of buyers arriving with a full 20 percent has shrunk.

Part of the reason sits in a rule change made in Wellington. From 1 December 2025 the Reserve Bank eased its loan to value speed limits, lifting the share of new owner occupier lending banks are allowed to write above 80 percent of a property’s value from 20 percent to 25 percent. The limit on investor lending above 70 percent of value went from 5 percent to 10 percent. The Reserve Bank’s reasoning was that the debt to income restrictions introduced in 2024, which cap most new owner occupier lending at six times gross household income, now carry part of the load, so the deposit rules could be loosened. Easier settings, it said at the time, would give banks more room to lend, particularly to first home buyers. The first home buyer low equity share crossed 50 percent for the first time about six weeks later.

A low deposit is not free. Banks charge extra for these loans, usually as a low equity fee added to the loan or a low equity margin bolted onto the interest rate, because the bank is carrying more risk. As interest.co.nz put it, low equity loans “are considered higher risk, because they would generally give the borrower less wriggle room to restructure their repayments should they strike financial difficulties”, and the bank holds less security if the loan goes bad. The flip side is that they are more profitable for the lender.

There is also a straightforward effect on what people pay. Interest.co.nz estimates the average price paid in June by a first home buyer using a low equity mortgage was $721,000, while buyers who turned up with at least a 20 percent deposit paid an average of $668,000, or 7.4 percent less. Borrowing capacity, not saving discipline, is doing a lot of the work in deciding what a first home costs.

What makes the June figure worth pausing over is the market these buyers are stepping into. Real Estate Institute figures for the same month showed the national median sale price at $770,000, down 1.3 percent on May and barely changed on a year earlier, while the House Price Index, which adjusts for the mix of homes sold, fell 0.9 percent in the month and 2.4 percent across the three months to June. A buyer with a 10 percent deposit only needs values to slide a little further before the equity they scraped together has gone.

That does not matter much to someone who stays put and keeps paying. It matters a great deal to anyone who has to sell inside a few years, or who wants to refinance and finds the bank valuing the house below the loan.

The borrowing side is not getting easier either. Wholesale rates have climbed since the Reserve Bank’s turn on the official cash rate and fixed mortgage rates are expected to follow them up. Meanwhile the deposits themselves are increasingly being assembled out of retirement savings, with first home withdrawals making up the bulk of the $244 million pulled out of KiwiSaver in June.

Put together, the numbers describe a first home buyer market that is more active than it was four years ago but built on thinner foundations. More people are getting in. They are getting in with less of their own money, paying more for the privilege through low equity fees, buying slightly dearer houses than the buyers with bigger deposits, and doing it while the index that tracks underlying values is still drifting down.

Have you bought your first home with a low deposit, or are you holding out to save the full 20 percent? Tell us how the maths is stacking up for you in the comments below.

This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂