KiwiSaver first home drawdowns quadruple

More than half of the first home buyers helped by one mortgage broker were using KiwiSaver. Photo / Dean Purcell

Buyers take $57.2m out of savings funds to finance themselves into housing.

The amount of money being withdrawn from KiwiSaver by first-time home buyers to get on to the property ladder has more than quadrupled in a year.
A report from the Financial Markets Authority shows $57.2 million was taken out in the year to March 31 - up from $12.3 million in the previous year.

The first savers became eligible to take their money out of KiwiSaver to buy their first home from June 2010. KiwiSavers become eligible to withdraw both their own contributions and their employer's contributions once they had been in the scheme for three years.

Loan Market mortgage broker Bruce Patten estimated more than half of the first-home buyers he helped to get a mortgage were using money from their KiwiSaver schemes.

Patten said KiwiSaver had been a big driver of the current market where demand was outstripping the properties for sale in Auckland.

"A lot of the people we are seeing would not have got into the property market without the savings scheme."

Patten said KiwiSaver had created a bit of a paperwork burden but providers had been good to deal with and typically took around five to 10 days to approve money withdrawals.

However, it was also resulting in a chicken and egg situation with banks refusing to approve loans without first getting the KiwiSaver money approved.

At the same time, the KiwiSaver providers needed the home offer to go unconditional before they were able to release the money.

Patten said most first-time buyers succeeded in getting their money out and he was also seeing more interest from second-time home buyers who can also apply if they meet certain criteria and their financial situation is similar to that of a first-time buyer.

Property conveyancing lawyer Ross Sly, of Churton Hart and Divers, said around 5 to 10 per cent of all the property deals he oversaw involved at least one person in a couple accessing their KiwiSaver money, and of those he knew were first time buyers it was around 40 per cent.

Sly said the law firm made all those they dealt with aware of the option to use KiwiSaver to help buy their home through its standard letter.

Sly said he had never come across any KiwiSaver applications before joining the east Auckland-based firm at the start of the year but now one in 10 deals could involve KiwiSaver.

Sly said one catch was that people could not apply to get their money out once their property settlement had gone through.