KiwiSaver's mortgage diversion relaxed

Monday, 15 September 2008

More KiwiSavers will be able to divert contributions towards repaying their mortgages under changes to the scheme, Finance Minister Michael Cullen announced today.

Under the current scheme people can apply for mortgage diversion, allowing them to put half of their 4 percent contribution back into reducing their house debt.

However, because of criteria restricting mortgage diversion to table mortgages - effectively ruling out anyone with even a small revolving credit facility - few people were eligible.

Dr Cullen said those rules had now been relaxed.

"The majority of mortgages will qualify provided the diverted contributions reduce the home loan.

"This does not prevent a bank agreeing to lend more against the home but it does prevent diverted contributions automatically being offset by an increased home loan."

In effect the changes mean people with a small revolving credit facility will be able to use the diversion as long as it goes on to the table component of their loan.

A Treasury spokesman said he understood that most banks were likely to require the payment coming on top of minimum repayment contributions.

The new regulations, implemented by Order in Council will come into effect 28 days after they are notified in the New Zealand Gazette.

- NZPA