Increasing the KiwiSaver HomeStart scheme's income and house price caps is a 'step in the right direction”, says Tauranga Mortgage Brokers Ltd. principal Tracey Robinson.

But while more people can access assistance to buy or build their first home, that's not going to make land prices any cheaper which Tracey says is 'probably the biggest problem”.

The KiwiSaver HomeStart scheme's income and house price caps increase from today. File Photo.

'The cost of land going forms a major part of the purchase price, and with it going up all the time like it has been, it won't be too long for the cost of a house to go beyond the new caps,” he explains.

The Government has lifted the caps for the KiwiSaver HomeStart scheme which offers first home buyers a grant of up to $10,000 for an existing house and $20,000 for a new home.

From today, income caps increase from $80,000 to $85,000 for single people, and from $120,000 to $130,000 for couples. While house price caps are being raised by $50,000, reflecting the increase in the national median house price since the scheme began, with the total amount depending on the region.

In Tauranga, this means the previous cap of $450,000 will be increased to $500,000 for purchasing existing houses, and $550,000 for building new houses – which Tracey thinks will have a big impact.

'Under the previous cap it was almost impossible to build a new house for $450,000, so $550,000 will give people a bit more scope. There are new house and land packages out at Pongakawa and Paengaroa and they start at $480,000, so clearly that was $30,000 over the previous maximum.”

But while the income cap has risen, Tracey's quick to point out that it's 'not a cake walk”.

'Because at $130,000, couples can only just afford the repayments. They're on the edge if you'd like, it can be done but it can be difficult. Usually it's couples with a double income and no children.

'When I say ‘no children', it's not essential, but usually if couples or single people do have children they're either paying high childcare/day care costs or they're on a single income,” says Tracey.

Making the announcement over the weekend, Building and Housing Minister Dr Nick Smith says the Government has lifted the caps to help middle income earners into a modest home.

These increases will also be applied to the Welcome Home loans, which enable first home buyers to buy with a 10 per cent deposit, and because they are Government guaranteed they're exempt from the loan-to-value ratio limits from the Reserve Bank.

'A couple who are each on the average income of $60k will, after five years in KiwiSaver, now be able to withdraw $45,000 from their KiwiSaver accounts and obtain a HomeStart grant of $20,000 if they're buying a new build,” says Nick.

'With this $65,000 deposit, they may be eligible for a Welcome Home Loan, which requires only a 10 per cent deposit, enabling them to be in the market for a new home of up to $650,000.”

Nick says these changes are about 'deliberately screwing the scrum” in the housing market in favour of first home buyers.

The HomeStart and Welcome Home loan changes help first home buyers by giving them a cash grant for a deposit, while the Reserve Bank's capital LVR changes, effective from September 1, make it harder for low equity housing investors, he says.