Kiwibank says it will let customers borrow for KiwiBuild homes with only a 10 per cent deposit.
The move may help first-home buyers struggling to save a 20 per cent deposit to get a property under the scheme, which aims to build 100,000 houses in the next 10 years.
There is a slight sting in the tail – the customers may need to pay a "low equity fee".
Under Reserve Bank rules, banks can only lend 15 per cent of their total mortgage book to people who don't have a 20 per cent deposit.
But a Kiwibank spokeswoman says that KiwiBuild homes are exempt because they are new builds. In those circumstances, banks can choose to lend to someone with only a 10 per cent deposit.
"Kiwibank is really excited to make the dream of home ownership come true for more New Zealanders," Kiwibank group marketing manager Mark Wilkshire said.
"We are putting Kiwibank out there as the first choice for KiwiBuild participants.
"The government's efforts to restore the Kiwi dream of home ownership is an aspiration Kiwibank can support. We know the response to KiwiBuild from the public has been enthusiastic with over 30,000 first-home buyers registering their interest in the first few weeks," Wilkshire said.
"Home ownership rates are now at the lowest level in over 60 years, there are not enough homes being built and not enough starter homes. First home buyers are struggling to get on the property ladder and KiwiBuild could help to address this issue."
The announcement from Kiwibank came as the online pre-qualification portal for KiwiBuild opened.
"The online portal is now live and that represents an important milestone for the KiwiBuild programme," says KiwiBuild head Stephen Barclay.
"It's the first opportunity for New Zealanders to have a look at the pre-qualification system.
"There is no rush to pre-qualify for a KiwiBuild home. My advice is to familiarise yourself with the system, get a better understanding of the information you'll need to provide us with, and obtain some financial advice as well.
"The best time to enter the pre-qualification stage is when a KiwiBuild development becomes available in an area where you would like to live. Submit your details and supporting documentation to the secure online portal at kiwibuild.govt.nz and then we'll be in touch to let you know if you have qualified to enter a ballot," he said.
In the first year, KiwiBuild will deliver 1000 homes, another 5000 by June 2020, and 10,000 in 2021.
The initial focus will be on areas with high housing demand and affordability pressures including Auckland, Wellington, Hamilton, Napier-Hastings, Queenstown-Lakes District, Tauranga, Whangarei District and Nelson-Tasman.
However, National's Housing and Urban Development spokeswoman Judith Collins said many questions still remain about the KiwiBuild programme.
These included how is Housing NZ going to require people to retain ownership of homes for three years and when is KiwiBuild going to have more than just a limited number of houses ready for sale.
Collins also questioned whether allowing first home buyers to take on large loans with just a 10 per cent deposit was actually in their interests because they would subsequently be hit by an additional "low equity fee".
"Mr Twyford continues to show he has no idea how KiwiBuild will work. He needs to front up with answers instead of pushing murky details," she said.