Given the expensive nature of property in New Zealand, saving for a deposit to buy a home can be a huge ask for aspiring home owners. But exactly how big a deposit do you need to save? Canstar explores how much you need to save to buy a house in New Zealand.
How Much Deposit Do You Need To Buy A House?
Although you can buy a home with a deposit of as low as 5%, it’s preferable to save at least a 20% deposit for a home for three reasons:
- Your mortgage application won’t be restricted by the loan-to-value ratio (LVR) restrictions
- Lenders reserve their lowest mortgage rates for home buyers with at least a 20% deposit
- You’ll not have to pay extra costs, such as a low equity premium or lender’s mortgage insurance
How Much Deposit: What are the LVR restrictions?
An LVR represents how much deposit is needed compared to the size of the loan required to purchase a property. If you want to buy a house for $1 million and the bank requires an LVR of 80%, you’ll need a 20% deposit: $200,000.
The rules were introduced in 2013 by the RBNZ in an attempt to cool the overheated property market. Over the years, the LVR restrictions have been tweaked, and they were removed entirely in response to the economic impact of the pandemic. But at the beginning of 2021, the LVR restrictions were reinstated.
Currently, the LVR rules mean that most prospective owner-occupiers need a 20% deposit to secure a property. However, lenders are still allowed to lend beyond the LVR of 80% for up to 15% of their mortgages. So that doesn’t mean you must have a 20% deposit to buy a home.
Banks are still able to accept low-deposit applications
Even with the LVR restrictions in place, banks are still able to process low-deposit home loans. They are just limited to 15% of their new lending.
If you’ve a good income and a secure job, and can prove to a lender that you’ve a solid financial head on your shoulders, you could still find a lender willing to grant you a mortgage.
And it’s not like every FHB is competing for a low-deposit loan. The latest RBNZ mortgage figures show that around 30% of FHBs have a deposit of at least 20%.
NB: It’s also worth noting that only registered banks in NZ have to adhere to the LVR rules. Non-bank lenders can set their own limits, although many non-bank lenders charge higher interest rates than the big banks.
How Much Deposit: Low deposit = higher mortgage rates and fees
However, because low-deposit borrowers are at a greater risk of defaulting on their loans, if you’ve a low deposit, you’ll end up paying more for your mortgage.
The extra cost comes in the form of a low equity premium (LEP), either higher interest rates, or an additional one-off charge on top of a mortgage.
Depending on the size of the deposit and lender, it can range from an extra 0.25% to 1.5% p.a. in interest, or a 2% premium on the loan amount.
As you can see from the below figures, if you’ve less than a 5% deposit, you could end up paying an interest rate well over 8% per annum. (Figures correct at time of writing: 11/09/2023).
ANZ
Over at the ANZ, the low equity premium is charged as a one-off fee, which can be added onto your loan.
Special fixed 1-year rate: 7.25% p.a. (Minimum 20% equity)
Standard fixed 1-year rate: 7.85% p.a.
Low Equity Premium:
- 80.01% – 85% LVR: 0.25% of loan amount
- 85.01% – 90% LVR: 0.75%
- Over 90.01% LVR: 2%
ASB
Fixed 1-year rate: 7.45% p.a. (Minimum 20% equity)
Low Equity Premium:
- 80.01% – 85% LVR: 0.30% p.a.
- 85.01% – 90% LVR: 0.75% p.a.
- 90.01% – 95% LVR: 1.30% p.a.
- Over 95.01% LVR: 1.50% p.a.
BNZ
Classic fixed 1-year rate: 7.19% p.a. (Minimum 20% equity)
Low Equity Premium:
- 80.01% – 85% LVR: 0.35% p.a.
- 85.01% – 90% LVR: 0.75% p.a.
- 90.01% – 95% LVR: 1.00% p.a.
- Over 95.01% LVR: 1.15% p.a.
Kiwibank
At Kiwibank, borrowers with low equity face interest rates 1% p.a. higher than those offered to customers with a 20% deposit.
Special fixed 1-year rate: 6.99% p.a. (Minimum 20% equity)
Standard fixed 1-year rate: 7.99% p.a.
Home buyers applying for a government-assisted First Home Loan with less than 10% equity face a 0.25% p.a. premium on top of the bank’s special interest rate. This is in addition to a Lender’s Mortgage Insurance (LMI) premium of 1% of the loan amount, which is usually added onto First Home Loan mortgages.
Westpac
Special fixed 1-year rate: 7.25% p.a. (Minimum 20% equity)
Standard fixed 1-year rate: 7.85% p.a.
Low Equity Premium: 0.25% – 1.5% p.a. depending on size of deposit
→ Related article: What is the First Home Loan?
How Much Deposit: LEPs not all bad news
Although paying a higher mortgage rate is never preferable, if it allows you to get into a first home, it can be worth the short-term pain. For due to the way that ongoing LEPs are calculated, as you pay off your loan and, hopefully your property rises in value, your LEP should diminish as the equity in your home rises.
However, to ensure that you’re not out of pocket, you’ll need to keep a close eye on house prices in your area and the size of your debt. Banks won’t actively revise the LEP that you’re paying unless you contact them and ask for a re-evaluation of the price of your home and your equity in it.
→ Related article: How to Buy a House with Less Than a 20% Deposit
First Home Buyer Loan Rates
If you’re currently considering a home loan, the table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
How Much Deposit: Average prices vs deposits
Of course, the size of the deposit you need to buy a home depends on the property and its location. Region to region and street to street houses vary in size, quality and price.
However, as a rough guide, here’s what 10% and 20% deposits for median priced homes around the country look like. Happy savings!
| Median Price | 10% Deposit | 20% Deposit | |
| Auckland | $990,000 | $99,000 | $198,000 |
| Bay Of Plenty | $800,000 | $80,000 | $160,000 |
| National | $770,000 | $77,000 | $154,000 |
| Nelson | $739,000 | $73,900 | $147,800 |
| Wellington | $737,000 | $73,700 | $147,400 |
| Waikato | $720,000 | $72,000 | $144,000 |
| Tasman | $710,000 | $71,000 | $142,000 |
| Otago | $680,000 | $68,000 | $136,000 |
| Marlborough | $677,000 | $67,700 | $135,400 |
| Northland | $672,500 | $67,250 | $134,500 |
| Hawke’s Bay | $662,000 | $66,200 | $132,400 |
| Canterbury | $658,000 | $65,800 | $131,600 |
| Gisbourne | $575,000 | $57,500 | $115,000 |
| Taranaki | $570,000 | $57,000 | $114,000 |
| Manawatu/Wanganui | $557,000 | $55,700 | $111,400 |
| Southland | $430,000 | $43,000 | $86,000 |
| West Coast | $330,000 | $33,000 | $66,000 |
Source: REINZ
About the author of this page
This report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.
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