By now, most will be aware that the cherished KiwiSaver cherry (aka Government contribution) was halved again during Budget 2025.
It went from a juicy $521 to $261 per annum, slashed for the second time from its original $1,000.
While investors were busy wiping away tears and reporters scrambling for other headlines, the Budget money-saving bus also ran over a lesser-known KiwiSaver adjacent gem.
The HomeStart Grant used to work alongside KiwiSaver First Home Buyer withdrawals and provided up to $10,000 extra toward a first-home deposit for those who met its strict criteria.
Its rather subdued removal was intentional, I suspect. Reporters were only given 30 minutes’ notice of the press conference when its burial was announced. (See RadioNZ report here).
The Grant was aimed at ambitious but challenged home buyers whose salaries were at the lower end. Qualifying homes were capped at first quartile pricing. It meant that in places like Auckland, Wellington or Christchurch, you’d be hard-pressed to find your dream home and gain access to these funds.
Still, it was a decent enough carrot that it brought investors who knew about it into KiwiSaver so they could strategically fatten their deposits through the investment scheme, confident it was a better return on investment than a bank deposit.
From May 2025, it disappeared. National estimated that its removal would save $425 million over four years.
Next chapter for KiwiSaver first-home buyers
The termination of the First Home Grant won’t kill first-home buyers’ dreams. It just means those who were hoping to use it will have to work harder and/or save longer for a deposit.
For the time being, the ability to withdraw KiwiSaver savings for a first-home deposit remains intact. For just how long, who knows?
New Zealand is the only place in the world where a retirement savings scheme can be tapped early for the purposes of buying a home.
It is no secret that governments worldwide, including New Zealand, are pondering how best to restructure state pension plans to make them more sustainable. Pushing out the age of eligibility to access them is one way, as evidenced by Canada, the UK, Australia and the U.S.
In the UK, for example, the current State Pension age is 66 years old for both men and women. This age is scheduled to increase to 67 between 2026 and 2028, and to 68 between 2044 and 2046
Forcing individuals to save more through self-funded and workplace investment vehicles like KiwiSaver is another way to give state pensions a longer shelf-life, accommodating superannuitants living longer than ever and a burgeoning number of retirees under the Silver Tsunami of Boomers and Gen X in the pipeline.
I’m not necessarily in favour of this, but closing off the KiwiSaver first-home buying loop could be the answer in New Zealand.
This scenario could be all the more likely with compulsory KiwiSaver (which many, including fund managers, are pushing for) and means testing in NZ Super, something that is now in the political consciousness in NZ.
To be clear, neither is a reality currently, merely a possibility. But with an unrelenting political appetite to muck around with KiwiSaver, it’s a much stronger possibility than I would have thought imaginable a decade ago.
Previously, any suggestion of means or asset testing NZ Super used to make politicians choleric ~ across all party lines. That’s no longer the case.
The KiwiSaver tides are shifting
Anyone who follows retirement savings policy in New Zealand will know that means testing has now entered the arena, and it is just a matter of time before the age of eligibility changes, however politically unpalatable that may be.
Make no mistake, upward adjustments in age and means testing pension plans are not radical ideas.
Australia’s superannuation has been means-tested for some time.
Back to property
So, where does this leave aspiring first-home buyers who are in KiwiSaver currently?
Those whose applications for the HomeStart Grant were in train before Budget 2025 won’t be impacted.
Those determined to get on the ladder, sooner rather than later, still have the First Home Loan programme.
It is not dependent on KiwiSaver and does not offer free money. Instead, it holds the promise of first-time homeownership with a smaller-than-normal house deposit of 5%, instead of the standard 10-20%.
Introduced in 2019 when Housing New Zealand Corporation was rebranded to Kāinga Ora, the First Home Loan is underwritten by Kāinga Ora via an additional insurance premium of 1.2% paid by the first home buyer.
As with the HomeStart Grant, it is a shallow eligibility pool built around income thresholds mainly. The insurance premium used to be .5% but doubled under Budget 2025 announcements.
Easy money or millstone?
For most people, borrowing more money simply means prolonging the pain of debt repayment. It is not necessarily a good thing, but that depends entirely on one’s personal circumstances, goals and POV about debt.
It should be said, the 5% club is limited.
According to KāingaOra’s website, qualifying applicants must:
- Be a New Zealand citizen, permanent resident, or a resident visa holder who is “ordinarily resident in New Zealand”
- Be a first home buyer, or a previous home owner in a similar financial position to a first home buyer
- Have a before-tax income from the last 12 months of:
- $95,000 or less for an individual buyer without dependants; or
- $150,000 or less for an individual buyer with one or more dependants; or
- $150,000 or less (combined) for two or more buyers, regardless of the number of dependants
What does this mean in practical terms?
According to the Real Estate Institute of New Zealand, the median house price in Auckland is around $990,000. Still a lot of money by anyone’s calculation. Knock out Auckland, and the national median sits around $691,500. Read more in the NZ Herald article published July 15th here.
Taking the national median average, those keen on a 5% loan would need a deposit of around $34,575. The insurance premium component of that would be an additional $8,298. So, a combined $42,873 would be what you would need to have stowed away in your individual or combined KiwiSaver or private savings. Compared to a 10% deposit of nearly $70,000, it represents an expedited path to first-home ownership.
A little financial preparation and planning goes a long way
Most buyers can also plan for a minimum additional $10k to cover lawyers’ fees and start-up costs. Buying and owning a house is not cheap.
Outside of the bank of mum and dad, getting that nest egg built to a sufficient size can take time.
The financial website interest.co.nz provides a useful chart of how long, and at what income levels, it takes to save for that first home deposit at 10%.
A sobering point in any home buyer’s journey will be understanding how long and how much it costs to repay mortgage debt. Discouraging, maybe, but useful if it helps borrowers figure out and plan for a pathway to financial independence.
A crude example:
If you were to borrow $650,000 at today’s average interest rate of 5.5% over 30 years, the total amount repaid would be $1,329,386, with the interest portion exceeding the principal amount at $679,386 alone. This highlights dramatically how paying a higher deposit can be beneficial to finding your way to financial freedom quicker, along with other strategies to pay off the mortgage quicker.
Online tools, including Sorted.org.nz, interest.co.nz, Moneyhub.co.nz and ChatGPT or its equivalent are well worth scenario testing.
- Work out your repayment rates here on Sorted’s mortgage calculator.
- Shop around for the best rates here on interest.co.nz .
On the interest.co.nz tool, you can also see what a difference it makes paying weekly versus fortnightly and monthly to give you an idea of the effect of compound interest over time.
The removal of the $10,000 HomeStart Grant is disheartening for those close to achieving their goals, but with good planning and saving, it is still achievable.
The greater challenge will be paying off the mortgage over time, which should highlight the importance of getting the right mortgage rate and structure in place and having discipline to tackle it.
As with most things in life, knowledge is power. Doing the homework is massively beneficial, financially and emotionally. It gives you peace of mind.
Resources
Who qualifies as a first-home buyer? Read the details here to find out.
What are the steps to buying a first home if you plan on using KiwiSaver? Find out here.
Walk me through the process. Try using Kainga Ora’s decision tree tool here.
The information above is informational in nature and is not meant to be construed as personalised financial advice. Those requiring financial advice, should consult with a fee-based authorised financial advisor.
