From October 1st 2013 buying a home will be a little tougher for those who have a small deposit.

Banks will be required to restrict the percentage of low equity mortgages to no more than 10% of the dollar value of their lending - which means they will be restricted to how many mortgages they can approve for people with less than 20% deposit.

The Reserve Bank action is designed to cool the housing market, and acts independent of the government who wanted first home buyers to be exempt. Source: TVNZ. The Reserve Bank was concerned about the rate house prices were increasing and the risks to the financial system.

Kiwibank said that it will prioritise first home buyers over property investors, but the critical issue when assessing a loan application was the borrowers ability to repay the loan, not how much deposit they had.

Harcourts NZ CEO Hayden Duncan said first home buyers will be penalised, and the move will have no impact on the real housing issue - which is low supply.