First-home buyers relying on their KiwiSaver funds to get into a home are bracing themselves to see the impact the Covid-19 coronavirus will have on their nest egg.

Photo: RNZ / Claire Eastham-Farrelly

After three years in the scheme, KiwiSaver funds can be withdrawn to help people to buy a first home.

With sharemarkets around the world taking a battering in reaction to uncertainty about Covid-19, people are finding that boost to their deposit is not quite as healthy as they once thought it was.

Christchurch electrician Sean Widdowson is hoping to buy his first home by June, but will need to use his KiwiSaver funds to get him over the line.

He was shocked when he checked his balance yesterday morning.

"So far this year I went from around plus $100,000 to minus $1400, so that's a loss of almost $2500."

He said he may have to delay his plans if his funds dropped further.

"Everybody is just speculating about how much things are going to change. But I've now switched to conservative to stem the bleeding, as it were, cause I really can't afford to lose much more or I won't hit my target at all."

Heather Roney from Mortgage Ladies and Co said 90 percent of her clients were reliant on their KiwiSaver funds for their deposits.

She recently had a client who had stretched finances almost to the limit using KiwiSaver to make up the deposit only to find the fund had dropped and they were about $200 short.

They then had to really scramble to make up the difference so they could go unconditional.

Roney said she had heard of another couple who found themselves $9000 short of their expected funds they needed to go unconditional.

"A lot of our first-time buyers don't have that kind of money lying around and other pool of resources that they can call on," Roney said.

"If you are working on a tight budget and reliant on KiwiSaver for your deposit, it is absolutely imperative that you really understand exactly how much you will have at time of withdrawal before deeming any contract unconditional."

Wellington mortgage broker Sonya Reid said that could also mean the price of the home people could afford to be looking at also changed.

"Someone I'm working with, their KiwiSaver balance has dropped from $47,000 to $44,000, so all of a sudden they are in the price range of $440,000 instead of $470,000 so that has a real impact on what they can buy now."

With the markets so volatile, people also need to factor in the gap between when they request their funds and the usual 10 days needed to process the application.

Bruce Patten from Loan Market said every day could mean a change in value of that KiwiSaver fund.

He said the extent of the impact would be much more profound on those in a high-risk fund.

"Someone in a conservative fund may have no impact, someone in a growth fund may have lost 10 percent of their balance, 15, 20. Any different amount depending on where it's invested and who is looking after it. So it's really just highlighting - go and find out so you don't end up with a shock on settlement day suddenly finding out you are $6000 short of purchasing your new home."

Mortgage broker Heather Roney said there was still a large lack of understanding about how KiwiSaver worked, with many still thinking of it more like a savings account.

She said now was a great time for people to familiarise themselves with how they work, and what sort of fund they have their money invested in.