First Home Loan Income Cap Could Rise to $300,000: What the Proposal Means for You

If you're saving for your first home, you may have seen the headlines about a $300,000 income cap for 5% deposit loans. Here's a plain-English breakdown of what was announced, what the scheme looks like today, and what would need to happen before anything changes.

What was announced

On 6 September 2026, the National Party announced that if it is re-elected, it will lift the income cap for the Kāinga Ora First Home Loan scheme to $300,000. The announcement was made in Auckland by Prime Minister and National leader Christopher Luxon and housing spokesperson Chris Bishop.

The proposal would replace the current two income caps with one cap of $300,000. It would apply whether you buy on your own, as a couple, or in a group, and whether or not you have children.

This is an election promise, not a change to the scheme. The current rules still apply today.

How the First Home Loan works today

The First Home Loan lets eligible first home buyers purchase with a deposit as low as 5%, instead of the 20% most banks usually ask for. The loans are issued by participating banks and lenders, and underwritten by Kāinga Ora. That backing lets lenders offer loans that would otherwise fall outside their usual lending rules.

Key points of the current scheme:

Deposit: from 5%.
Income caps: $95,000 for a single buyer with no dependants; $150,000 for two or more buyers combined, or a single buyer with dependants. These caps have not changed since 2022.
No house price cap: price caps were removed in June 2022, so the property value doesn't affect eligibility.
Mortgage insurance: borrowers pay a lenders mortgage insurance fee, which can usually be added to the loan. Since Budget 2025, borrowers meet the full cost of this insurance.
Outside the LVR speed limits: First Home Loans are exempt from the Reserve Bank's loan-to-value restrictions, which limit how much low-deposit lending banks can do.
Lender checks still apply: you still need to meet the lender's normal affordability tests, and other eligibility criteria apply.

Today vs the proposal

Income caps

Single buyer, no dependants: up to $95,000 today → up to $300,000 under the proposal
Single buyer with dependants: up to $150,000 today → up to $300,000 under the proposal
Two or more buyers (combined): up to $150,000 today → up to $300,000 under the proposal

Other rules (no change announced)

Minimum deposit: 5%
House price cap: none
Lender affordability checks: yes

What it could mean for you

If your income is under the current caps: nothing changes. You may already be eligible for a First Home Loan today, so there's no need to wait for the election.

If your income is above the current caps but under $300,000: you could become eligible if the policy goes ahead. National says around half of first home buyers now earn more than about $146,000, so this could cover many dual-income households who currently miss out.

A smaller deposit doesn't mean a bigger loan approval. The proposal lowers the deposit hurdle, not the affordability test. Lenders would still check your income, expenses and ability to repay at stress-tested interest rates. For example, if you buy a $700,000 home with a $35,000 deposit, you'll still need to show the bank you can comfortably repay a $665,000 loan.

When could it start?

Even if National is part of the next government, the change would not happen straight away:

Election: the general election is on Saturday 7 November 2026.
Forming a government: under MMP, parties often need to negotiate a coalition or support agreement. Policies can be changed, delayed or dropped in those talks.
Government decision: the new government would need to formally approve the change and set a start date.
Rollout: Kāinga Ora and participating lenders would need to update their criteria and systems before new applications can be assessed under the higher cap.

National has not announced a start date. If you're ready to buy now, plan around today's rules rather than a change that may or may not arrive.

Arguments on both sides

Supporters say:

The caps haven't been updated since 2022 and haven't kept up with wage growth.
Many couples and professionals earn above $150,000 combined but still struggle to save a 20% deposit while paying rent.
It reuses an existing scheme rather than creating a new one. National estimates the extra cost at $4 million to $6 million a year, assuming the scheme doubles in size.

Critics say:

Letting more people buy with a small deposit could add to demand and lift prices in some areas, especially as first home buyers are already very active in the market.
Buyers with a 5% deposit start with little equity, so a drop in house values could leave some owing more than their home is worth.
Kāinga Ora's role includes helping people on low or modest incomes into home ownership, and some question whether a $300,000 cap fits that purpose.
Some point out that the current government ended the First Home Grant in 2024, and question how first home buyer support will change over time.

Buying your first home?

Find out whether you qualify under today's rules, or get in touch to talk it through.

Sources