Those struggling financially due to increased mortgage interest rates or because they had lost their job should not put off contacting their bank, Bankers Association chief executive Roger Beaumont said. Photo / Michael Craig
Those struggling financially due to increased mortgage interest rates or because they had lost their job should not put off contacting their bank, Bankers Association chief executive Roger Beaumont said. Photo / Michael Craig
Banks are being urged to step up and support families and businesses coming under financial strain as the pressure comes on from rising interest rates.
The plea comes from the Reserve Bank in a report outlining the challenges in the fight against inflation, which also includes the potential for higher unemployment.
The Bankers Association said anyone experiencing financial difficulty should make it a priority to contact their bank to discuss their options.
Its chief executive Roger Beaumont told Morning Report the fact New Zealand’s banks were in good financial shape would help the country weather the economic storms that were “inevitably coming”.
“Having strong banks [that] are robust, [that] can steer into those storms, will enable the economy to get through.”
People who were facing any “significant change in circumstance” that would cause them difficulty paying their mortgage - such as losing their job - should ring their bank immediately, he said.
“If you’re having financial difficulty it’s best that you talk to your bank and map out a plan for what you can do.”
He defended the banks’ profit margins saying they were operating in a competitive market but that the lenders understood their social responsibilities to customers.
“Banks need to be strong economic forces in any economy and banks are solid institutions in New Zealand.”
Beaumont said people having to re-fix their mortgages at higher rates would be experiencing “a material change” in terms of their household outgoings.
However he noted that serviceability margins were included when banks determined whether loans should be approved, meaning most customers should have some buffer that allowed them to absorb the increased costs.
‘A wonderful position to be in’ - RBNZ governor
Reserve Bank governor Adrian Orr also said New Zealand was in good economic shape to face the types of challenges being seen the world over.
He told Morning Report the banks were very financially stable, which was a “strongly positive thing”.
“New Zealand would have one of the most well-capitalised and highly liquid financial sector in the world ... that is a wonderful position to be in for the country as a whole.”
He reiterated the need for banks to keep in touch with customers who may be struggling, saying it was “in no one’s interest for the banks to be acting in a short-term manner”.
Reserve Bank of New Zealand Governor Adrian Orr, left, with Finance Minister Grant Robertson. Photo / Mark Mitchell
The rising interest rates and current economic situation should not be a surprise to anyone, he said, citing the “unbelievable situation of Covid” and ongoing geopolitical tensions.
“Look at that, understand that ... none of this should be a surprise to anyone, and none of it is a surprise to us about the situation that New Zealand is in.
“In an absolute sense, yes, we have high inflation, in a relative sense, we are probably ... one of the best-positioned economies globally.”
‘We’re now coming steeply down the other side’
National Party finance spokesperson Nicola Willis said she took issue with the Reserve Bank governor’s assertion the country was in a “wonderful” position, calling his statement “breathtaking”.
“We’re actually in a position where thousands of New Zealanders now find themselves in negative equity, with their home worth less than they’ve borrowed, thousands of New Zealanders anxious about whether they will be able to meet their mortgage payments,” she told Morning Report.
She said house prices had risen 30 per cent in a single year because so much money had been pumped into the economy.
“We’re now coming steeply down the other side; this is not a wonderful position for New Zealand to be in.”
Willis questioned whether the economy could be called “strong and resilient”, saying people were struggling with one of the worst cost-of-living crises in decades.
“Prices have been running laps around wage growth - we’re now going to have a large group of New Zealanders who’re paying huge proportions of their income into debt servicing.”
National's Nicola Willis says house prices had risen 30 per cent in a single year because so much money had been pumped into the economy. Photo / Mark Mitchell
She said the drivers of inflation needed to be tackled, which in National’s view included addressing worker shortages, reining in government spending and adjusting tax brackets.
“Inflation is robbing people twice: once by making people pay higher prices every time they’re at the Eftpos terminal, and then the second time, by pushing them into higher tax brackets.”
But Finance Minister Grant Robertson said fixing worker shortages was not simple in a constrained global labour market and giving tax cuts to wealthy New Zealanders was not the answer either.
He told Morning Report there was a global shortage of labour coming off the back of the pandemic and while the government’s immigration reset would help, “we have to fight hard to get those people to come here”.
He acknowledged unemployment would likely rise as the economic situation tightened but said that had been predicted by most forecasters and was also signalled in the government’s Budget forecasts in May.
“You’re never going to get me seeking to have more New Zealanders unemployed, I’m extremely proud of the fact that actually we’ve come through Covid with, not only unemployment at 3.3 per cent, but adding people to the workforce.”
Robertson said National’s plan to cut taxes would only exacerbate the country’s inflationary problems.
He said it was the Reserve Bank’s job to ensure price stability and the government’s job to ensure New Zealanders were supported to develop the skills required to help them stay in work.
“There is a balance to be struck here ... there are no costless decisions when it comes to managing a pandemic and the economic impacts of that.”
Struggling to pay your mortgage? When to contact your bank
Those who were struggling financially due to increased mortgage interest rates or because they had lost their job should not put off contacting their bank, Bankers Association chief executive Roger Beaumont said.
“You should contact your bank immediately, rather than wait until you’ve had some missed mortgage payments.”
There were options available, such as moving to interest-only payments or extending the term of a person’s mortgage, he said, and the sooner those experiencing difficulties talked to their bank, the better.
“If you’re struggling to make those increased costs, then you should talk to your bank.”
