Savings under home ownership account

Press, Volume CXIII, Issue 33253, 16 June 1973, Page 3

Savings under home ownership account

/.Veto Zealand Press Association) WELLINGTON, June 15. Details of the new savings scheme for people buying or building their first home, announced in the Budget, were given today by the Minister of Finance (Mr Rowling).

Mr Rowling said al prospective home-owner would be able to save in a special account. Provided these savings were applied in full to buy or build a first house or flat for owner-occupancy, the saver would qualify for a tax re-1 bate which would be added; to the savings and also, for the first five years of own-, ership, for a subsidy on mort- • gage interest payments. Some conditions of eligibility would have to be met. These were:— The scheme will be available only to those who have' not previously owned a house or flat. The amount of eligible saving under the scheme is limited to SIOOO a year. The shc-test qualifying period is to be three years after a minimum of $250 has been saved, with a maximum of five years. At the end of five yegrs the savings can be left in the account and continue to earn 3 per cent interest. The benefits, however, will not be available until a house is required. Aggregation of the benefits of a home ownership account will be permitted in the case of a man and woman who save independently under the scheme. To encourage savers to stay with the scheme, three months notice of withdrawals will be required. TAX REBATE The tax rebate will be equal to 25 per cent of the new savings each year, excluding interest, payable when the savings are withdrawn to build or buy a home. The mortgage interest subsidy in each of the first five years of home ownership will be 2| per cent of the sum of the amount saved for one year, plus twice that saved for two years, plus three, times that saved for three years, plus four times that saved for four years, plus five times that saved for five ■ years. In no case, however, will a subsidy be given which in effect reduces the average rate of interest on all mortgages on the property below 3 per cent a year. Home ownership accounts would be available from October 1 at all branches of

I the Post Office Savings Bank. ■ said Mr Rowling. Trustee [.savings banks were being incited to take part in the scheme. Holders of home ownership accounts will be given preference by the State Ad" vances Corporation in the allocation of loans. Mr Rowling said he believed that the benefits available under the scheme would greatly help people on lower and middle incomes to ac-j quire a home. EXAMPLES GIVEN A person able to save $5OO a year would at the end of five years have a capital sum ’ ■(including the tax rebate) of' about $3359, to use as a de-j posit on a home. As well, he would be entitled to a mort-; gage interest subsidy which would reduce his mortgage interest payments as much as' $187.50 a year for the first

five years of his mortgage. A person able to save $lOOO a year would at the end of three years have a capital sum (including the tax rebate) of about $3934. and would be entitled to an • annual mortgage interest subsidy of up to $l5O for five years. JOINT EFFORT A couple both saving for a home under the scheme. ;one saving $lOOO a year and ‘the other saving $5OO a year would at the end of three years have a capital sum (including the tax rebate) of about $5900. They would be I entitled to an annual mortgage interest rate subsidy for (five years of up to $225. At the end of five years they would have a capital sum of about $10,078 and would be i entitled to an annual mort'gage interest rate subsidy for five years of up to $562.50.