KEY POINTS:
Newlywed Aucklanders Mike and Marie Wickham know first-hand about the stress of rising mortgage bills.
Last week, National leader John Key said more Kiwis were downsizing to cope with rising mortgages.
Three weeks ago the couple, who married in October, downsized from their small Mt Wellington home to a more modest property in New Lynn.
The Wickhams decided to bite the bullet before their mortgage became impossible to handle.
"As soon as our two-year fixed mortgage rate rolled over we knew we couldn't have afforded the house we were staying in," said Mike, an engineer.
"It wasn't even going to be tight - we just couldn't afford it. Interest rates had probably gone up another 2 per cent from what we had."
The average lending rates of homeowners coming off their fixed term in the next 12 months is about 7.8 per cent but most fixed lending rates are now around 9 per cent - a big jump.
The Wickhams' payments went from $1400 a fortnight to close to $1700. "One wage was covering the original repayments but the increase was close to 1 1/2 [wages]," said Mike.
Although the 28-year-olds, who both work, now have a more manageable mortgage they have put their plans for children on hold for at least five years. They say they couldn't get by on just one income.
"We're still worried about what will happen in a year's time," said Mike. "If mortgage rates keep going up the repayments in a year's time may still equal the repayments we had on a more expensive house."
He's not the only homeowner fretting. Claims of an explosion in so-called "mortgage stress" in New Zealand have put housing affordability firmly back on the political agenda.
Mortgage stress has been defined as households that spend more than 40c in each after-tax dollar on mortgage payments. The proportion of households in that position has almost tripled in just three years, from just under 4 per cent in 2004 to more than 11 per cent in June 2007.
Jeff Staniland, CEO of Mike Pero Mortgages, said it was imperative that people facing mortgage stress should seek advice as soon as possible. "In some cases that may just be some free budgetary advice, while for others it may be to restructure their mortgage or to consolidate other debt."
Raewyn Fox, CEO of the NZ Federation of Family Budgeting Services, anticipated client numbers would increase as rising interest rates started to bite. "We're already seeing people that are worried about it," said Fox.
Although numbers were relatively low - people using the service tend to be renters rather than homeowners - she believed that would change in a few months. "Once your mortgage goes up, for the first couple of months you might manage, but then you start getting behind," she said. "[Our figures are] only just going up as renewal dates are coming up."
She believed renters would also be affected as investors put rents up. She advised people to seek help now. And there was more potential bad news for homeowners last week, as economic commentators predicted that rising interest rates in the US would affect New Zealand fixed-term rates, particularly three, four and five-year mortgages, which have traditionally been the cheapest.
However, at least one mortgage broker said investors might be down about rising interest rates, but they were certainly not out.
Jacqui Ritchie, of the Hybrid Group, said her clients tended to be philosophical about rate rises, even though some owned as many as 20 investment properties.
One client had to refinance from a 6.9 per cent interest rate to an 8.5 per cent rate, costing an extra $100 a week on one property. Ritchie said: "Investing in property has risk associated with it so it's about being sensible."
