The New Zealand government-owned Kiwibank yesterday said it agreed to buy a 51 per cent stake in New Zealand Home Loans for about NZ$8 million.The move will boost Kiwibank's share of the mortgage market because it will take over the funding of NZHL's prime mortgages. That will deal a blow to Commonwealth Bank of Australia subsidiary Sovereign that previously provided the bulk of NZHL's funding.The 10-year old NZHL currently has about NZ$1.7 billion in mortgages funded by Sovereign. NZHL founder and chief executive John Erkkila, who will continue to run the company, says that will be close to NZ$2 billion by the time Kiwibank takes over funding new loans from August 1.Loans already written with Sovereign will remain in place and, as with the Sovereign-funded loans, all the Kiwibank-funded loans will be written under NZHL's brand. Customers taking out loans funded by Kiwibank will be able to use Kiwibank's own ATM machines. The Sovereign-funded loans use ASB ATMs.Erkkila says it will probably take until the end of the year for all new loans to be Kiwibank-funded as new systems are rolled out across NZHL's 28 franchised offices.At the end of December, Kiwibank's mortgage book had grown to NZ$2.09 billion, giving it 1.8 per cent of mortgages funded by registered banks.Erkkila says on a personal basis, ending his company's relationship with Sovereign is "incredibly sad. They've been extremely supportive of us over the years."He says a prime motivation for forming a relationship with Kiwibank is because it's a New Zealand-owned bank."A third of our balance of payments deficit pays the dividends to offshore banks and currently New Zealanders spend 113 per cent of their incomes. Put those two things together and the question is, isn't it about time that New Zealanders were able to bank with a New Zealand bank where the profits remain in New Zealand," Erkkila said.He denied that money was a prime motivation. "We would've got more dough from other players in the market place."He says his prime objective in business is to try to help New Zealanders get out of debt. "Unfortunately, we have to lend them money to do it." Rather than simply providing home loans, NZHL provides its customers with complete financial packages.The reason Kiwibank decided to buy a stake in NZHL, rather than just provide funding as Sovereign, was because "the investment required to achieve the things we're wanting to achieve means they're probably going to have to pick it up in their balance sheet," Erkkila says.Kiwibank spokesman Bruce Thompson said Kiwibank was "looking for a strategic partnership where we will grow their business as well as our business and where we would have a seat on their board." Ratings agency Standard & Poor's has confirmed Kiwibank's "AA-" credit rating.Sovereign says it will continue to support NZHL and its existing customers."While Kiwibank's equity investment will clearly see a reduction in the level of new loan volume NZHL places with Sovereign, we are in a strong business growth phase. We anticipate our volumes and market