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Two-thirds of Westpac home loan customers are ahead in their mortgage repayments, with customers living at the top of the South Island furthest ahead and those living in the main centres following closely behind, according to data released by Westpac.
Westpac NZ’s Chief Product Officer, Shane Howell, said home loan customers had been making the most of the low-interest rate environment to repay their loans faster.
“We’ve seen some of the lowest interest rates over a sustained period in New Zealand for some time. It’s good to see customers are using this opportunity to pay down debt more quickly.”
In the main centres, Wellington has the highest proportion of customers ahead on their repayments at 69.8%, a median average of $12,224 and 13 months ahead. This is followed by Canterbury at 68.1%, a median average of $9,025 and 11 months ahead; and Auckland at 67.2%, but with the highest median average of $14,266 ahead.
The three regions at the top of the South Island with the highest proportion of customers ahead on their repayments is Tasman at 71.1%, a median average of $10,942 and 13 months ahead; Nelson at 70.2%, a median average of $10,942 and 13 months ahead; and Marlborough at 69.4%, a median average of $9,719 and 14 months ahead.
The regions with the lowest proportions of customers ahead on their repayments include Southland at 56.6% and a median average of $2,924 ahead; the West Coast at 55.7% and $3,319 ahead; and Taranaki at 58.5% and a median average of $4,271 ahead.
Customers needed to be at least three months ahead in their repayments to be included in this data. The median customer was eight months ahead and over $8,000 ahead in their repayments.
Mr Howell said many people had come off higher loan rates during a high rates cycle a few years back.
“They’ve kept making the same level of repayment even though the cost of the loan – the loan rate – has fallen. This has allowed them to make real progress on paying down their loan faster and saved them thousands of dollars in the process.
“Alternatively, if people are able to increase the amount they repay each fortnight or month by $50, $100 or even $200 when they come to refix, it can make a substantial difference to their interest savings. It’s a smart move if they can afford it,” Mr Howell said. “We’ve seen an increase in the numbers of customers choosing to float a portion of their loan. It gives them the flexibility to pay off their loan faster.”
Mr Howell gave the example of someone paying off a $300,000 mortgage over 30 years at an interest rate of 5%.
“If that person pays the minimum $743 per fortnight that’ll take 30 years to pay off and cost $279,418 in interest.
“But by paying off an extra $50 a fortnight, they can take three years off the mortgage and reduce their total interest by more than $42,000.”
Westpac customers with floating mortgages are able to pay down their debt faster by making payments at their discretion, while those on fixed-rate mortgages can arrange to increase their regular payments at the point of refixing, or pay a lump sum at the end of a fixed rate term without break costs to achieve the same outcome.
Westpac NZ data:
The table above shows the regional breakdown of home loan customers ahead in their repayments, ordered by the number of home loan customers in the region.
*Average amount ahead and average months ahead are median averages.