New Zealand home owners with mortgages appear to still be demonstrating resilience in the face of big rises in interest rates, figures in the New Zealand Banking Association's retail banking data insights for the six months to June show.
"Over 43% of home loan customers were ahead on their loan repayments, compared to 1.4% of home loan customers behind on their repayments. That shows that many people with home loans are managing relatively well. It means that those paying more than their minimum repayments likely built in a cushion in case their circumstances change. It also means they’re paying off their debt faster," NZ Banking Association chief executive Roger Beaumont said.
In terms of the details, the 1.4% of customers behind on their loan repayments as of June 2023 compared with 1.23% of customers behind in the previous six month period ended December 2022.
The number of customers ahead with payments has dropped. The 43.7% ahead as of June 2023 was down from 44.7% as at December 2022.
NZBA said of all banking customers in the six months to June 2023, 9,080 applied for hardship status, an increase of 84.9% compared to the last reporting period. The hardship status was granted to 5,655 customers over the six month period, an increase of 31.9% from the last reporting period. NZBA pointed out that there are 9.5 million unique customer accounts.
And during the latest period, 11,090 home loans switched from principal and interest to interest-only repayments. In the previous six months to December 2022, there were 12,120 home loans that made the switch.
"Banks are here to help, and 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," Beaumont said.
During the six months to June 2023 there were 40,438 new home loans during the period, which was a decrease of 11.4% from 45,628 in the six months to December. The average value of those new loans was $382,913 - which was an increase of 2.6% on the figure in the six months to December 2022.
Of the 40,438 new home loans opened, 26% were issued to first home buyers and the average-sized loan for the FHBs was $546,176, an increase of 11.1% from the last reporting period.
NZBA said as of June there were nearly 1.25 million home loans across 1.08 million customers. The average value of all home loans was $323,463.
In terms of credit card debt, NZBA said for the six months to June 2023, 65.6% of cards were paid off in full without incurring any interest cost. That percentage is actually down slightly on the 67.4% figure in the six months to December 2022.
NZBA said while the number of credit card customers as of June 2023 decreased to 2.21 million (a decrease from 2.23 million), the number of credit cards increased by 1.4%.
The average monthly spend per credit card account slightly decreased, to $2,004 from $2,121 as of December.
"Over 65% of people with a credit card are paying off what they owe without incurring any interest cost. That shows a high level of financial capability among credit card holders," Beaumont said.
20 Comments
Increasing debt stress for some. I know a lot of people who are keeping up with payments but are mortgage trapped as they have no room to move and have to divert all disposable income to the mortgage keep up. Or they're cutting their losses and moving on. Either way...
Ouch because these are real people. Ouch because the consequences of leveraged poor investment choices have a huge impact on these families
"Or they're cutting their losses and moving on."
These owner occupier owners are the very unfortunate collateral damage of the property promoters who were motivated by their self serving financial interests. Motivated by their self serving financial interests, these property promoters used negative labels in their attempt to discredit those who gave warnings of high house price risks.
The property promoters with their self serving financial interests told owner occupiers that they should always buy property. Many owner occupiers buyers of 2020-2021 purchased residential property using high amounts of leverage. For these owner households, many will face not only financial stress but also mental stress (unfortunately some may resort to self harm). Many may have lost most of their entire equity deposit saved over many years (or even be in negative equity) and may now need social housing.
As a result of that single choice to buy residential real estate using high amounts of leverage, these families are now facing a vastly different financial future.
I start off with the longest initial loan term (30 years) and then structure my repayments from there, usually fix for 5 years with repayments @ 25 year. That way I can always fall back to 30 year equivalent repayments if ever in hardship.
ANZ allow you to increase payments by up to $250 per week once a year during a fixed period without any fees. I've increased my repayments each year by $300 per month since upgrading in 2021, so have gone from 25 year to 18 year effective term, all on a 5 year fix.
Earlier this year ANZ allowed me to repay part of my mortgage earlier without any fee for breaking my fixed term. I repaid $65k out of the $100k mortgage and kept my current rate which is 4.8%.
I was truly surprised that there were no fees - something tells me they need liquidity ;)
Sharing in case it helps anyone.
Six months ago, this REINZ search ...
https://www.realestate.co.nz/residential/sale?by=best-match&k=mortgagee)
... returned roughly 25 listings nationally.
A few months back it was up to 35. Some more and 45.
Now it's up to 57.
I think I see a trend.
Note also - a mortgagee sale generally runs to a fixed timeline so they don't sit there for months collecting dust.
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