A pre-fabricated house builder says a bank's decision to change the way it loans money on the houses is a "game-changer" for the industry which has previously had to provide finance for the builds out of its own capital.

Westpac is to roll-out a mortgage product aimed at helping people get into pre-fabricated houses - houses built offsite in a factory - after a nine-month trial funding six houses in Auckland and the Waikato.

Up until now New Zealand banks have only lent on pre-fabricated houses once they were moved onto the land because of concerns about security over the house while it was being built and risks around transporting it.

It's a change that could save new home builders a substantial amount of money.


Mark Dunmore, head of home ownership at Westpac, said pre-fabricated houses could shave 60 per cent off the build time cutting it down from around 22 weeks to seven or eight weeks.

The cost of an average $350k house build could also be cut by $50k, he said which made it an attractive proposition for first home buyers.

Dumore said the bank would now offer construction loans to pre-fab home-buyers provided they met standard lending criteria from the start of the process.

A pre-fabricated house built in factory in Huntly by BuildSmart is the first to be completed in a trial run by Westpac bank. Photo / Supplied
A pre-fabricated house built in factory in Huntly by BuildSmart is the first to be completed in a trial run by Westpac bank. Photo / Supplied

"For the first time, we're offering a simple and streamlined process for prefab buyers and builders, which will help put more New Zealanders into affordable and well-designed homes."

"Our new way of funding essentially means we have security before the house is delivered, which removes much of the uncertainty for buyers and builders partnering on a build."

Westpac began its trial in May last year.

The first home in the trial is being built in a factory in Huntly and is due to be finished in the next three to four weeks when it will be transported to Mangakino for a family of six to move into.

Dunmore said the trial homes had taken longer to complete than it had expected due to factors outside of its control including soil issues, consenting and home-owners taking their time to make decisions.


"Plus we have been a bit fussy," he said.

As a new build pre-fabricated home-buyers may only need a 10 per cent deposit - lower than the 20 per cent required for many existing house home loans, making it attractive to first home buyers.

Dunmore expected the number of its loans on pre-fab houses to increase into the double digits and possibly the triple digits on the change.

"There is a general appetite out there."

Phil Leather from BuiltSmart, which has built the first home under the Westpac trial, said it had taken a long time for a bank to come on board with the process but predicted it would be a "game changer".

Up until now Leather said BuiltSmart, which has been in business for 35 years, had been funding the building of pre-fab houses themselves which meant it could only build around three or four at a time or around 65 to 70 a year.


Leather said change would boost its production by 10 to 15 per cent.

He expected other banks to follow Westpac.

"I think a lot of other banks will pick it up."

The house it has built for the trial is 117sqm four bedroom two bathroom house.

Built in factories, prefab homes can often be constructed more quickly and cheaply than a house built onsite, and without weather delays.

Industry body PrefabNZ has estimated 4,000 prefab homes will be built in New Zealand in 2019 and a further 7,000 in 2020.


PrefabNZ chief executive Pamela Bell said Westpac's financing model simplified the most complex part of buying a transportable home.

"The type of support being offered through this new programme has never been seen in New Zealand. We expect it to be a hit with buyers and builders."