KEY POINTS:
Financiers are warning that crippling interest rate rises could soon force homeowners to the wall, defaulting on their loans and selling their homes.
With $40 billion of new mortgages written last year alone, the stakes are high, and as a third of fixed-rate mortgages come up for renewal in the next 12 months, some lenders are beginning to fret about recovering their money.
Thursday's rate increase put the knife in, forcing two lenders - Mike Pero Mortgages and General Finance - to say problems were spiralling.
One online auction site listed 16 properties up for mortgagee sale or auction. None had a single bid by midday yesterday.
On the list was a large four-bedroom house on a 1010sq m site at the foot of One Tree Hill for the rock-bottom bargain of $310,000.
Agent Ray White said the owners were selling because the site was owned by the Cornwall Trust Park Board and next year will cost the vendors $40,000 in annual ground rent. They have been paying $5000 a year.
Mike Pero, who founded the Mike Pero broking franchise and has sold his shareholding but remains a director, said he feared that with bank interest at about 10 per cent, more financiers would foreclose on loans.
The firm writes $1.8 billion in mortgages a year, yet he predicted many people would soon be unable to pay.
"People worst affected will be the ones with borrowing and servicing costs which were just at break-even point. But that now becomes a deficit."
His comments were backed by another financier who has noted more people missing mortgage payments.
James Lockie, director of General Finance, which has lent $375 million on residential real estate, said more people were unable to pay but the situation was not yet desperate.
"We are putting effort and time into arrears, seeing small increases in defaults but not too drastic," he said.
Mr Pero predicted more people would be forced to sell their homes to repay loans because of punitive interest rates. "The Government is trying to promote saving through a compulsory KiwiSaver scheme on the one hand, but on the other the Reserve Bank decision is, in effect, increasing interest rates and failing to offer tax cuts to mitigate the effect on a homeowner's disposable income.
"New Zealand is becoming a nation of renters and this trend may well continue with Kiwis being unable to enter the property market. My advice is for homeowners with mortgages to talk with their mortgage broker to review their mortgage structure and look to secure competitive fixed rates to weather the storm."
Graham Viall, who oversees national mortgagee sales for Harcourts, said the number of forced sales was not changing.
Tony Alexander, BNZ chief economist, said he saw some trouble ahead but no disaster.
Gone to the wall
* Warnings issued on more mortgagee sales.
* People with high debt levels most at risk.
* Sixteen mortgagee sales draw no bids.
* More foreclosures predicted after rate rises.
