The 20% deposit has long been treated as the price of admission to home ownership in New Zealand. On a median-priced house that's well north of $150,000 in cash.
So, National's announcement this week on 5% deposits got attention. But low-deposit lending isn't new – and one pathway at a major bank isn't limited to first home buyers at all.
What National has announced
On Sunday, Christopher Luxon and Housing Minister Chris Bishop pledged that a re-elected National government would widen access to the Kāinga Ora First Home Loan scheme – the government-underwritten product that lets eligible first home buyers purchase with a 5% deposit rather than the 20% banks typically require.
The mechanism is simple: lift the income cap. Currently a single buyer must earn $95,000 or less, or $150,000 or less for a couple or a single buyer with dependants. National would raise that to $300,000 for both single and combined incomes.
Bishop's argument is that the caps haven't moved since 2022 – a junior doctor on $100,000 or a couple on $160,000 combined is locked out despite being exactly the borrower a bank would lend to if the deposit were there. National expects the change to roughly double the scheme's size.
Worth noting what this is and isn't:
What already exists: 5% deposit lending from a major bank
Here's the part that gets less coverage. One of the banks we work with will consider owner-occupier home loans with as little as a 5% deposit, assessed case by case, outside the Kāinga Ora scheme.
What makes this particularly useful is who can apply. In our experience at KPM, this bank's 5% deposit lending isn't restricted to first home buyers. It can be available to borrowers who already own a home and are buying their next one, or who already own investment property – including property financed with other banks.
That matters. The Kāinga Ora scheme excludes anyone who owns other property. For an investor with equity tied up in a portfolio, or a family upgrading without selling first, a bank willing to go to 95% on an owner-occupied purchase can be the difference between moving now and moving in a few years' time. It's particularly important if you think now isn't a good time to sell your property.
The trade-offs are real, though:
Should you use a 5% deposit?
The case for: you buy sooner, stop paying rent, and if prices rise you've captured that growth on the full value of the property with very little of your own money in. For buyers with strong incomes and thin savings, the maths often favours getting in early.
The case against: your buffer is thin. A 5% deposit means a 5% fall in values puts you at zero equity, and after selling costs you're effectively underwater before that. If you need to sell in the first few years, a small deposit can turn a manageable situation into a difficult one.
What matters is your income stability, how long you plan to hold, and whether you'd still be comfortable if values dipped for a while.
The bottom line
National's policy, if it happens, would open the government-backed 5% pathway to a much wider group of first home buyers – but not until after November, and not for anyone who already owns property.
If you're in that second group, or don't want to wait on an election, the options already exist. The right first step is to have your position properly assessed before you start looking – so you know what's achievable, what it'll cost, and which bank is the right fit.
Thinking about buying with a small deposit? Whether it's your first home, your next home, or you're adding to a portfolio, our team can tell you where you stand and which lenders are open to your situation. Get in touch with us here for a free, no-obligation chat.
This article is general information only and does not constitute financial advice. Lending criteria, interest rates and government policy are subject to change. Kris Pedersen Mortgages recommends you seek personalised advice from a licensed financial adviser before making any decisions about your home loan.