National would lift the income cap on the government’s low deposit home loan scheme from $95,000 to $300,000 if it is returned to office, a change the party says would roughly double the number of first home buyers using it.
Leader Christopher Luxon and housing spokesperson Chris Bishop announced the policy in Auckland on Sunday morning. It applies to the First Home Loan scheme, which is underwritten by Kāinga Ora and issued through participating banks and other lenders. The scheme lets an eligible buyer purchase with a 5 percent deposit rather than the 20 percent most lenders want, because the Crown carries the risk the bank would otherwise refuse to take.
The change is to eligibility, not to the loan itself. Under the current rules, an individual buyer with no dependants must have earned $95,000 or less before tax over the past 12 months. An individual with dependants, or two or more buyers combined, must have earned $150,000 or less. Those thresholds were last moved in 2022. National would scrap the distinction between single and joint applicants entirely and set one cap of $300,000 for everybody.
Bishop’s argument is that the caps have fallen behind what ordinary working couples now earn. “Right now, a junior doctor on $100,000 can’t access the scheme. Nor can a young couple, like an electrician on $85,000 and a teacher on $78,000, or two friends who have just graduated from police college and are earning $77,000 each,” he told RNZ. He said the average gross income of a first home buyer is now around $146,000, meaning about half of them already earn more than the top cap allows.
“So, while a combined income of $150,000 might sound like a lot of money, the reality is that plenty of young couples now earn more than that but still struggle to save for a 20 percent deposit while juggling the cost of rent, food, and childcare,” Bishop said in the party’s announcement.
The gap he is describing is worth putting in dollars. Cotality’s Home Value Index for August put the national median dwelling value at $797,944, after a fifth straight monthly fall. A 20 percent deposit on that median home is about $159,600. A 5 percent deposit is about $39,900. The difference is roughly $119,700 of cash a buyer does not have to accumulate first, which for most people is the difference between buying this year and buying in eight years.
What the scheme does not do is lend anyone more money than a bank thinks they can repay. National’s policy document is explicit about that, saying the scheme “lowers the deposit hurdle, not the income servicing test” and that lenders will still assess every applicant against stress tested interest rates and their responsible lending obligations, with the lender making the final call. So a couple earning $290,000 would become eligible to apply with 5 percent down, but would still have to pass the same servicing test as anyone else.
There is a cost to the borrower that sits outside the headline. Kāinga Ora charges lenders a Lenders Mortgage Insurance premium of 1.2 percent of the loan amount, and the lender passes it on. Since Budget 2025 the borrower meets that cost in full, where the government had previously subsidised part of it. On a 95 percent loan against a median priced home, 1.2 percent works out at about $9,100, and it can be added to the mortgage rather than paid up front. It is a real number that gets very little attention in the campaign version of this policy.
The scheme is smaller than its 23 year history suggests. It has supported more than 33,000 households since it began in 2003. National says Kāinga Ora approved more than 7,700 new applications between 1 July 2025 and 30 April 2026, while its policy document records 3,085 loan underwrites in the 2024/25 financial year at an administration cost of $14.5 million. Approvals and settled loans are different things, and both are small against the wider market. Bishop said 4,000 of last year’s roughly 25,000 first home buyers used the scheme, about one in six. He would not put a figure on how many more would use it under the new cap, saying only that “we do expect by widening the eligibility, thousands more will use it”.
National costed the change at $4 million to $6 million a year, funded from existing baselines, on the assumption the scheme doubles in size. That is a small number by the standards of housing policy, and it is small because the Crown is underwriting risk rather than handing out cash. That is the deliberate contrast with the First Home Grant, which the coalition scrapped in 2024 and which had paid eligible buyers up to $10,000. “Giving people an amount of money in cash… was a very blunt and ineffective way of actually helping,” Bishop said. Announcing the grant’s end in 2024, he said it had shrunk from covering about 10 percent of a standard deposit when it was introduced in 2010 to just over 4 percent by 2024.
The politics of the timing are straightforward. First home buyers are the one active part of a slow market. Bishop said they made up 29 percent of all purchases in July, which he called the highest monthly share in more than 20 years, and the party is campaigning on a stated goal of returning home ownership to about 74 percent of households from 66 percent now. Loans underwritten by Kāinga Ora are also exempt from the Reserve Bank’s loan to value restrictions, so widening eligibility widens a channel that sits outside the main lending speed limit at a time when low equity bank lending is already rising.
Whether $300,000 is the right line is the argument the campaign will now have. It is high enough to cover almost every two income household in the country, which is the point if you think the deposit is the only real barrier, and the objection if you think a taxpayer backed product should be aimed at people who need it most. What is not in dispute is that saving $159,600 on a median wage has become close to impossible, and that every party now has to say something about it. You can see how house prices and the years of household income needed to buy them have moved across 18 New Zealand cities since 2001 in our interactive house price tool, and you can check where each party stands on this and other policies before you vote with our voting tool.
Would a $300,000 income cap have made the difference for you, or is the deposit not really the problem? Tell us 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 🙂
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