A Tauranga homeowner has sold his house and opted to rent due to soaring interest rates, while others have ditched eyebrow waxes, date nights, birthday bashes and holidays to pay the mortgage.
Homeowners are feeling the pinch of interest rate rises as well as living cost increases that outstrip inflation. With 80 per cent of fixed-term loans due to reprice in less than two years, more homeowners are seeking budget advice or taking drastic action to cut costs.
Richard O’Neil said that when his mortgage payments jumped from $760 to $1000 a week it was the last straw. and He sold his house in Tauranga about a month ago.
He was renting a new home for $695 a week and without rates or home insurance he was saving about $300 a week.
O’Neil said the sale proceeds would allow him and his wife “to go on some take holidays and “make memories with the kids”.
“We don’t need to own a home but it has taken me a while to settle with that. It’s still very new so I haven’t had much time to reflect and it’s taking a bit of getting used to. We could have met the mortgage payments but we didn’t want to.”
He believed interest rates would continue to rise: “It feels good to be no longer part of that system and on the debt treadmill.”
Claire, who did not want her surname published, said she decluttered her house and sold items for extra money as her mortgage increased by $200 a week when it was refixed a higher interest rate. She and her husband had looked at moving out of Tauranga but could not bear to leave family.
The mother of one said there would be no more date nights, eyebrow waxes, dining out and doing activities like escape rooms.
Money was “very, very tight”, made harder by grocery and petrol prices and the crippling cost of living crisis.
“Usually you try and save money on those but everything has gone up in price including rates which is really frustrating.”
She was self-employed and had to increase her rates and was babysitting as a side hustle.
Half of their mortgage was fixed on a two-year rate and the rest for three years.
Gordon Evaroa said his mortgage has gone up by $135 a week. In hindsight, he wished he had chosen the five-year fixed option at 2.43 per cent in 2021 instead of the two-year fix they traditionally followed.
“The impact of that and relentless price increases have put significant pressure on our disposable income. We are a three-person single-income family with gross income of $89,000 including NZ superannuation, which is taxed at 30 per cent.
“With costs for school and the usual household stuff, we feel we are quite lucky to have about $250 a week to spare but that gets whittled down easily.”
A working mum of two, who asked not to be named, said her mortgage payments jumped by $300 a week or $1200 a month.
The family’s budget was under the microscope and all spending had been reined in.
“The luxury items like getting my hair done won’t happen. My husband said I’d have to stop buying any new clothes or shoes. So it’s the treats, which is hard considering we have worked all our lives.”
She said they split their mortgage over two terms and went on to revolving credit. The couple had contemplated getting rid of their life insurance but did not want to take the risk as it would pay off their mortgage if anything happened to them.
Rotorua Budget Advice manager Pakanui Tuhura said the number of homeowners seeking help had increased by 20-30 per cent.
“The level of mortgage debt is much higher as many of the homeowner clients we are seeing these days are relatively new mortgage holders with larger debt due to the values of the properties they have purchased.”
Tauranga Financial Mentors manager Shirley McCombe said increasing mortgage rates meant homeowners were suffering and while the service could not bring mortgage or rent costs down, it could make sure every dollar they earned was working for them.
“We encourage people to forget about budgets and just focus on being really smart with their money, we all work hard to earn it, so we need to ensure none of it is wasted.”
Mortgage Lab financial adviser Keith Munro said it was often difficult for people to rein in spending when they were used to a lifestyle they could no longer afford.
“Identify the ‘must haves’ and set a budget. Then it is a matter of being firm with decisions on what has to be left on the shelf. Putting the brakes on big-ticket items may be appropriate. For example, making do with older appliances and furnishings, putting off a trip.”
The Mortgage Supply co-adviser Sam Burnett said it was receiving more client queries around strategy and cost management.
“A review of their current position is important. For some clients, it may be a restructure of the mortgage back out over a longer term, for others we may look at debt consolidation options to bring overall repayments down.”
The Mortgage Centre Rotorua principal adviser Praveen Bhati said with the rising rates environment and cost of living crisis “every single dollar that one can save is important”.
Banks spoken to by NZME last week were offering one-year fixed rates of 7.19 to 7.25 per cent, or 6.69 to 6.89 per cent for three years. They encouraged any struggling customers to contact them for support.
An ANZ spokeswoman said about 21 per cent of its loans had rates under 4 per cent and one-third of customers were ahead on their home loans by six months or more.
The bank was closely monitoring how customers were managing.
“We understand the cost of living and rising interest rates are having an impact as people come to refix their home loans.”
The number of mortgagee sales of residential properties over recent years had been low.
Kiwibank home lending general manager Nicole Pervan said its one-year term was the most popular, while about 1 per cent of home loans were on interest-only payments.
BNZ head of consumer lending Sarah Falanitule said about half of home loan customers had moved to rates of at least 6 per cent.
Mortgagee sales were still tracking below pre-Covid levels and were a last resort, she said.
The bank had a small uptick in mortgagee sales.
A Reserve Bank spokesman said about 80 per cent of fixed-term loans were due to reprice in less than two years.
In July 2023 there was $350.5 billion in residential loans compared with $339b last July and $321b in July 2021.
In July this year $35.8b was on floating rates and $314.7b fixed.
Stats NZ Household living-costs price index shows inflation faced by the average household in the 12 months to June was 7.2 per cent, more than a percentage point higher than the Consumers Price Index at 6 per cent.
The main contributors to higher living costs for the average household were higher interest payments (up 28.8 per cent) and grocery food prices (up 13.2 per cent).
Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.
"Before, you had no limitations ... and all of a sudden there’s a handbrake on."