Nearly half of mortgage holders still ahead with repayments

Personal Finance / news

NZ Bankers' Association figures show that as of June only a little over 1% of those with a mortgage were behind with their payments - a percentage that's actually dropped in the past six months

13th Oct 22, 2:03pm by David Hargreaves

Source: 123rf.com. Copyright: sodis

Nearly half of those with a mortgage were ahead with their repayments as at June this year, while the proportion that are behind in payments had actually dropped, according to banking industry body, the New Zealand Bankers' Association (NZBA).

The NZBA has released Banking Insights for the first six months of the year, which show that as of June, some 1.05% of customers were behind on their loan repayments - down from 2% in the six months to December 2021.

About 45.8% of customers, however were ahead with payments, up from 44% last reporting period. The information is sourced from NZBA’s 10 main retail member banks.

NZBA says of June there were 1.25 million home loans across 1.09 million customers. The average value of all home loans is $304,655.

These figures would suggest, therefore, that something like 11,000 customers were behind with loans, while just under half a million were ahead.

Of all banking customers, 6511 applied for hardship status, with this being granted to 4396 over the six month period. The latest release from NZBA didn't indicate how many customers might have switched to interest only payments.

In the previous six month period to December 2021, there had been quite a sharp rise in customers switching to interest only payments. As of that time around 1.3% of home loan customers (16150) had switched from principal and interest to interest only.

This pattern appears to have slowed, with as at June 2022, around 1.4% of home loan customers (17462) having switched from principal and interest to interest only.

The start of the big slow down in the housing market is reflected in these figures.

NZBA said there were 44,681 new home loans opened during the period, a decrease of 20% from 56,000 in six months to December 2021.

The average value of all new home loans opened was $417,463 a 3% increase on the last period.

The overall value of all new home loans opened decreased by 18% to $18.7 billion.

Of the 44,681 new home loans opened in the reporting period, 58.2% were issued to first time home buyers.

The average value of a home loan for first home buyers was $505,741.

NZBA chief executive Roger Beaumont said the figures showed many people with home loans continue to be well placed as interest rates rise from historic lows.

"As interest rates declined over recent years, these borrowers likely retained their repayments at the same level, or increased them, to help repay their loans faster, which shows a good level of financial capability.”

Beaumont said people were also managing their credit cards well, with 66.6% of card balances paid off in full without incurring any interest costs.

"While consumers are being smart with home loans and credit cards, it’s also fair to say that banks are continuing to lend responsibly. That’s particularly important as we face some economic headwinds.

"Anyone experiencing financial difficulty should contact their bank as soon as possible. The sooner you talk to your bank, the more likely they’ll be able to help."

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

20 Comments

by DTRH | 13th Oct 22, 2:16pm 1665623772

304k average home loan people have no problem paying this but now average house price in Auckland is a million plus the average loan would just provide enough for deposit. Big difference now can you see the bubble which is popping.

by Future | 13th Oct 22, 2:22pm 1665624136

With the North Shore crashing in price by 28% there certainly is some popping going on. With a population of over 200k that makes it bigger than some regions. Time to go pop some corn.

by chebbo | 13th Oct 22, 2:29pm 1665624583

Brilliant article David, I really enjoy reading your pieces.

This just goes to show that people have the wrong priorities; they want to pay off debt once it starts getting expensive, rather than taking the opportunity while debt is nice and cheap.

It will be interesting to see how this situation develops.

by J.C. | 13th Oct 22, 2:31pm 1665624696

Just goes to show that people have the wrong priorities; they want to pay off debt once it starts getting expensive, rather than taking the opportunity when debt is nice and cheap.

Be fair Chebs. They're behaving rationally but didn't see this coming. Not many did, expecially the people they probably follow in the media and talk to around the water cooler.

by chebbo | 13th Oct 22, 2:39pm 1665625186

Humm I'm not sure I'd call that rational. Pay off your debt while you can, people. Not when you have to.

by Nifty1 | 13th Oct 22, 2:46pm 1665625604

Who will do better in a recession- people who have paid down more than they have to on their home loans with no cash back up or those that made minimum payments but put aside a cash back up...

by chebbo | 13th Oct 22, 2:55pm 1665626130

Definitely those with less debt. That debt will be like the sword of Damocles hanging over their heads.

by J.C. | 13th Oct 22, 3:14pm 1665627273

Who will do better in a recession- people who have paid down more than they have to on their home loans with no cash back up or those that made minimum payments but put aside a cash back up...

This kind of misses the point. The ruling elite have been engineering the monetary system so the sheeple do not save or pay down debt. In many ways, it has been encouraged.

by Lanthanide | 13th Oct 22, 3:25pm 1665627952

The answer to your question is the people who did both - by having offset mortgages that allowed them to save cash and have that cash balance offset the mortgage interest.

Revolving credit loan is similar, but not quite the same - in that case you have actually paid down the mortgage, and accessing your cash means drawing down the mortgage again. That's fine in normal times, but after the GFC some people found that the banks reduced their revolving credit headroom down to $0, leaving them no opportunity to take cash out again.

by FCM | 14th Oct 22, 6:39am 1665682772

Mortgage offset, no interest, there if you need it to pay LS or to pay the bills if something happens to the job etc.

by RickStrauss | 14th Oct 22, 8:59am 1665691175

There aren't many banks that offer offset mortgages now are there? I vaguely recall ANZ but it seemed like offset was offered against floating rate chunks.

by FCM | 14th Oct 22, 9:34am 1665693260

BNZ total money

by GV 27 | 14th Oct 22, 2:41pm 1665711691

A positive of a big tightening up in lending is we may see some competition on the actual products offered, but so far it's just more cash-backs (that are actually already priced into your interest rate).

I'd gladly trade a $2k cash back on a new draw-down for greater flexibility for repayments across the life of the fixed period.

by J.C. | 13th Oct 22, 3:12pm 1665627126

Humm I'm not sure I'd call that rational. Pay off your debt while you can, people. Not when you have to.

Completely rational to pay off debt today if you think the cost will be higher tomorrow. Also rational to not pay off debt fast if you believe the recent past is indicative of the future.

by Carinaz | 13th Oct 22, 2:29pm 1665624549

To have the desired effect Mr Orr will have to raise the OCR by 1% or if he still pursue with 0.5% and it does not have much difference in February next year ( like now) , will be too late AND than Mr Orr will be forced to set a target of 5.5% from 4.75%.

So much money has been printed and distributed that will take tremendous effort to tame the inflation.

by J.C. | 13th Oct 22, 2:34pm 1665624889

So much money has been printed and distributed that will take tremendous effort to tame the inflation.

This is true. But I think it might be that the Gods said to Kaumatua Orr that how the commercial banks distribute the money under his karmic laws is not his responsibility.

by fortunr | 14th Oct 22, 9:11am 1665691868

Had Orr paid more attention to the actual job he was supposed to do (and for what is paid), rather than indulging in irrelevant woke BS, maybe he would have done a much better job and we would not have found ourselves in this situation.

by fortunr | 14th Oct 22, 9:07am 1665691661

I strongly agree.

Orr will have to raise the OCR to 4.50% or 4.75% with the next OCR review, or be forced to have an OCR peak of 5.5% (if not 6%) next year. Moreover, once the peak is achieved it will have to stay at that level (or close to it) for a few years to come. Inflation is already settled in, and it will take a long time to control it.

by Richard Brown | 14th Oct 22, 10:17am 1665695833

'Nearly half of those with a mortgage were ahead with their repayments as at June this year'

So more than half weren't then?

by Balanced Life | 14th Oct 22, 3:08pm 1665713310

I love this article, thank you author.

Yes, pay off the debt. History indicates that developed countries whose inflation goes over 5%, takes an average of 10 years to get their inflation back to 2%.

Until things stabilize, interest rates will likely be higher and unless one wants to pay closer double for their property, then it would be wise to be prudent and pay off the debt. I just paid my mortgage down when it rolled off the 2.19% and the feeling is amazing to have no debt. Better than locking in for another 5%+.