Phil Heatley

Wellington, Aug 19 NZPA - First home buyers will be able to borrow more under the Welcome Home Loan mortgage insurance scheme.

The scheme allows low income earners to borrow up to $200,000 without a deposit.

A 15 percent deposit is needed to borrow more.

The previous cap was $280,000, but Housing Minister Phil Heatley announced today that will be extended to $350,000.

Cabinet has also approved the use of the scheme to help people build on multiple-owned Maori land, Mr Heatley said.

"While house prices and interest rates have recently come down, bank deposit requirements have increased.

"This will also help tenants living in eligible state homes to buy their property."

Banks were also cautious about lending for properties on multiple-owned land because it cannot be used as security.

The change also allows buyers to take out loans to be built on land already owned by them.

"We want to encourage the building of new houses and in doing so stimulate the construction sector," Mr Heatley said.

Those wanting to borrow at the top end of the scheme will only be able to do so if they intend to buy a house in a high priced area.