Mortgage payments a riddle for many

Many people lack an adequate understanding of their biggest financial commitment, their home mortgage, a survey has found.

The survey, commissioned by the Retirement Commission and funded by the ANZ/National Bank, also found a lack of understanding of key elements of New Zealand Superannuation, even among those receiving it.

It found that 25 per cent of mortgage holders were not aware that increasing the frequency of payments from monthly to fortnightly would minimise interest. Furthermore, a third were unable to identify that there was no repayment penalty for variable home loans.

Retirement Commissioner Diana Crossan said the findings might indicate a general lack of knowledge about home loans. "It suggests to me that if they don't know that, they may not know other things around mortgages."

Crossan was surprised by the survey's finding that most people believed NZ Super was income or asset tested, which it is not.

It was a concern that some people may not be saving for their retirement or they may be leaving the workforce unnecessarily because of a lack of knowledge about their NZ Super entitlement.

"We just don't know whether people's behaviour is affected by that, hopefully it's not. But it does mean that we need to tell people ... that with NZ Super you can keep working and your income won't be affected.

"New Zealand needs people over 65 to keep working because we've got a skill shortage."

Overall, the survey found most people had "a reasonable understanding of personal finances" notwithstanding what Crossan said were potentially "pivotal" gaps around mortgages and superannuation.

The survey, conducted with the support of the Ministry of Economic Development, consisted of interviews with 856 people.