Two in five first-home buyers use low deposits
More New Zealanders are entering the property market with deposits well below the traditional 20%, new data from Cotality (formerly CoreLogic) and the Reserve Bank showed.
Experts said this is a rare opportunity for first-home buyers, with QV calling it one of the best windows in years. REINZ’s Rowan Dixon pointed to good pricing, plenty of stock, and low interest rates—urging buyers to act before the market picks up.
In March, 44% of all first-home buyers had less than a 20% deposit. First-home buyers also accounted for 78% of all low-deposit lending to owner-occupiers. By contrast, only $24 million of the total $947 million lent at low deposits went to investors.
“First-home buyers, basically, have the monopoly on low-deposit lending allowances at banks,” Kelvin Davidson (pictured), CoreLogic property economist, said in an RNZ report.
“Owner-occupiers further up the ladder may not need low-deposit finance as much, so that’s part of it, but I also think to some extent that the banks have been sort of reserving those speed limits for first-time buyers.”
Most banks under the 20% low-deposit lending cap
The Reserve Bank allows banks to lend up to 20% of new loans to low-deposit borrowers. But Davidson said those limits aren’t being fully used.
“The speed limit there is 20% [of new lending] but only about 12% is going out at low deposit… then other tests come into it,” he said. “About two in every five first-home buyers, or even a bit more than that, are entering with a low deposit.”
He added that some potential buyers may not realise these options exist.
“Some people might be out there thinking ‘gee I don’t have the required 20% so I can’t buy a house’, but actually there are allowances there and a lot of it goes to first-home buyers,” Davidson said.
“I think if you want to get into the market with a reduced deposit there probably is capacity – the speed limits overall aren’t really being tested.”
KiwiSaver withdrawals hit new highs
KiwiSaver remains a major contributor to first-home deposits. In April 2025, 3,970 people withdrew a total of $167.3 million to buy their first homes – up from 3,320 people in April 2024, RNZ reported.
Low-deposit interest rates becoming more accessible
Mortgage adviser Glen McLeod, of Link Advisory, said borrowers with less than 20% deposits are now accessing interest rates from 4.99% to 5.59%, depending on the lender and loan-to-value ratio (LVR).
“Those who qualify for a Kāinga Ora First Home Loan can access these same rates with as little as a 5% deposit, though a 0.50% fee applies,” McLeod told RNZ.
“When the deposit is under 20%, most lenders apply a low equity margin, which is typically tiered based on the loan-to-value ratio.
“These margins vary by lender, but we're starting to see some shift in the market – one major bank has recently removed these margins altogether, offering a standard rate and a discounted rate for borrowers with more than 20% equity.”
Income from boarders and family now part of the equation
Buyers are also finding creative ways to improve their borrowing power, RNZ reported.
“Whether it's friends helping with mortgage payments or adult children moving back home, many buyers are looking for ways to improve affordability,” McLeod said.
“In some cases, income from secondary dwellings or granny flats is also factored in, where accepted. It’s a reflection of how people are adapting to meet lending criteria in a challenging environment.”
Margins and cashback offers vary between banks
Loan Market adviser Karen Tatterson said banks continue to apply different rules to low-deposit borrowers.
“A first-home buyer with ASB who had a 10% deposit would pay the advertised interest rate plus a 0.75 low-equity margin,” Tatterson told RNZ. “As an example, their one-year rate would be 5.7%.
“ANZ, who do not charge a low-equity margin, apply their standard rate so for first-home buyer at 90%, their one-year rate would be 5.59%.”
She added that banks are also offering up to $5000 cash contributions to attract first-home buyers.
Market slowly improving, but still favours buyers
Davidson said the market has picked up: sales in April were up 4% year-on-year and now sit 7% above the historical average for this time of year.
“Sales activity has been on a steady incline, and we're now starting to see this translate into home values,” he said.
The Cotality Home Value Index rose 0.3% in April, marking the fourth consecutive month of growth. However, growth remains modest and uneven: Hamilton and Christchurch saw the biggest gains, while Dunedin, Wellington, and Tauranga were flat.
“Despite these signs of improvement, the market remains tilted in favour of buyers,” Davidson said.
Forecast: Moderate growth, driven by lower rates
Davidson expects house prices to rise around 5% nationally in 2025.
“We’re expecting a moderate upswing, with national property values forecast to rise around 5% for the year,” the Cotality economist said. “Lower mortgage rates will be a key driver. But we’re also watching the wider economy, the labour market, and the impact of lending restrictions, particularly debt-to-income limits.”
