Mortgage rates have increased sharply over the past two years. Photo / Avi Waxman
Mortgage rates have increased sharply over the past two years. Photo / Avi Waxman
The number of people unable to pay their mortgage and forced to sell their properties remains low, despite interest rates doubling over the past two years and intensifying cost of living pressures.
Financial experts say as these cost pressures mount, many New Zealanders are struggling to get by as theydo anything they can to keep their homes.
“We can see people who used to pay 2-3 per cent, now they’re paying 8.5 per cent,” said Māngere Budgeting Services chief executive Lara Dolan.
“Some of them are working crazy hours, like 12-14 hours and multiple jobs, just to be able to keep their houses.”
CoreLogic chief property economist Kelvin Davidson has warned we are in a “‘fingers crossed’ scenario” that’s dependent on people’s ability to keep their jobs and maintain their home payments.
“Nobody wants to see mortgagee sales - it costs everyone. It doesn’t benefit the banks, it doesn’t benefit the borrower,” he said.
“Maybe the only person who benefits is the person pulling up the property as a cheap buyer … it’s very much a last resort.”
Mortgage interest rates have surged in the past two years, but that hasn’t led to more people losing their homes. Mortgagee sales have increased in the last year, but remain lower than pre-pandemic levels. In the first nine months of 2023, there were 86 mortgagee sales compared with 90 in 2022, 61 in 2021 and 112 in 2020, according to data from CoreLogic.
Davidson says the reason mortgagee sales have remained low is because of the employment rate. Generally speaking, banks would work with people experiencing financial difficulty who still had an income rather than moving immediately to a forced sale.
After the Global Financial Crisis (GFC) in 2008, there were significant job losses and mortgagee sales skyrocketed by hundreds every quarter.
At the peak, 767 properties were sold in forced sales in the third quarter of 2009.
“After the GFC, people lost jobs, but this time, that hasn’t really been the case,” Davidson said.
“There was a huge amount of uncertainty; issues with banks with financing [then]. At the moment, banks seem to be highly stable. People are in work.”
In the June 2023 quarter, the employment rate reached the highest level since Stats NZ records began in 1986 – 69.8 per cent. The next Government employment statistics are due on Monday.
“There is still time to go in this process, you can’t just think everything is fine – but no one is really projecting job losses. It hurts, you have to pay more of your mortgage, [but] most people are going to keep their jobs.
“It’s a ‘fingers crossed’ scenario - they’ll [hope to] be able to keep paying it and adjust up to that 7 per cent.”
CoreLogic chief economist Kelvin Davidson. Photo / Peter Meecham
The latest Household Living Costs Price Index figures, out today, show although inflation has fallen, household costs and interest rates have not. New Zealanders have faced significant increases in the costs of essentials that have forced some to have to choose between the basics.
Tauranga homeowner Richard O’Neil recently told the Rotorua Daily Post he sold his house and opted to rent after his mortgage payments jumped from $760 to $1000 a week; while others have ditched birthday bashes, holidays, eyebrow waxes and date nights to pay the mortgage.
“The house is usually the last to go,” financial adviser Hannah McQueen said.
“When I’m working with clients, we try to exhaust all tactical opportunities first; make sure the mortgage is structured the right way, restructuring if we need to, even getting a mortgage holiday if we have to; cashing in Kiwisaver.”
Māngere Budgeting Services chief executive Lara Dolan said the number of people seeking help who were working either fulltime or part-time, and not on a benefit, had increased by 21 per cent over the past year. Clients were also taking up secondary jobs, such as driving for Uber, and working longer hours to cope with mortgage payments.
“Even though [the latest] interest increases were small, past increases were quite big.
“I, myself, have a house and a mortgage, quite a big one, and I’m petrified. I’m not a low-income [earner] but I’m petrified, I’m paying a huge amount for my mortgage. If it [interest rates] are going to keep going like that … I will be one of those people getting food parcels.”
Julia Gabel is an Auckland-based reporter with a focus on data journalism. She joined the Herald in 2020.
