Five new lenders have applied to the Government to offer Welcome Home Loans amid surging numbers using the first-home buyer scheme.
The number of people taking out Welcome Home Loans nearly quadrupled in November compared to the same month last year in the wake of changes to its eligibility criteria and a clamp-down on low deposit lending.
More than 200 loans were applied for in November - up from 54 in November 2012 and 135 loans approved in October when new rules came into force.
From October 1 house price caps were increased and income levels were changed, dropping $5000 to $80,000 for a single buyer and rising from $85,000 to $120,000 for a couple.
The house price cap for Auckland rose from $350,000 to $485,000.
The loans are seen as attractive by bank lenders because they are excluded from the Reserve Bank's cap on low deposit lending.
So far only eight financial institutions offer the loans.
Westpac is the only one of the four big banks to offer it.
But Housing Minister Nick Smith said a further five applications were in train although he would not say which lenders had applied for commercial reasons.
"I am encouraged by how quickly the market has responded to the changes on October 1."
So far this financial year 573 loans had been approved.
That is up from 403 loans in the same period last year.
While the numbers appeared small Smith said it was a significant portion of the approximately 8000 first-home buyers expected to buy a home during an average year.
Smith said there was no limit to the number of lenders that could offer Welcome Home Loans but the Government would have to consider increasing funding for the scheme if loan demand exceeded its annual cap.
The Government has capped the number of loans available to 2400 for the year to June 30, 2014.
Smith said the initial take-up was higher than expected but was aware that some borrowers had deliberately delayed buying a home until the new rules came in.
"When we made the changes in October we projected that the numbers would treble."
It was too early to predict whether the demand would exceed the cap in this financial year, he said.
Smith said raising the cap above 2400 loans would need consideration as part of the Government's 2014 Budget.
The scheme was previously seen as unhelpful to big city buyers, particularly in Auckland where the Real Estate Institute puts the median house price at $582,000.
While it was true that houses were more expensive in Auckland, Smith said it was the income cap change which had made more of a difference as big city dwellers also earned more.
"All indications are that big benefits are mainly being picked up in Auckland and Christchurch."
Welcome Home Loans
* 10 per cent deposit required.
* Buyers must buy a house under a price cap specific to where they are buying. For Auckland it is $485,000.
* Single buyers must earn under $80,000 and two or more buyers must earn under $120,000.
* The loans are excluded from the Reserve Bank's cap on low deposit lending.
* For owner-occupied properties only. It is not for rental or investment properties.
* You must not own any other property.
* Currently offered through Westpac, Kiwibank, TSB, Heartland, SBS Bank, NZCU, Fletcher Challenge Credit Union and NBS (Nelson Building Society).