Interest-free mortgage scheme is 'bananas,' says activist group

The scheme will make the housing affordability crisis worse, according to the group

By Krizzel Canlas

17 May 2018

The government’s plan to provide low-income, first home buyers with interest-free mortgages is the “sort of nutty government intervention which led to the GFC,” says the New Zealand Taxpayers’ Union.

On May 15, in a report from Otago Daily Times, Prime Minister Jacinda Ardern said the government was considering a “shared equity scheme” that will give second, interest-free mortgage to New Zealanders seeking a home.

In a statement, New Zealand Taxpayers’ Union executive director Jordan Williams called the scheme “a New Zealand version of Fannie Mae and Freddie Mac in the United States – a taxpayer-funded scheme to get people into mortgages they can ill afford.”

“The United States tried these kinds of policies to increase homeownership rates in low-income communities prior to the Global Financial Crisis, with disastrous effects,” he continued. “If there’s a market downturn and homeowners lose their jobs, the government is left with very large debts, backed by houses worth very little.”

In the immediate term, Williams claims this policy would make housing affordability worse. It will use taxpayer money to subsidise people entering the housing market, which increases pressure on prices.

“If the government wants to get more people into homes, the solution is to eliminate red tape and open up more land for housing construction,” he states. “Not throw taxpayer money at the problem.”