Selwyn_Times: September 20, 2023

Selwyn Times Wednesday September 20 2023
24
NEWS
Latest Canterbury news at starnews.co.nz
Late payments rise as banks pile
on the mortgage pressure
Rising interest rates are
putting the squeeze on
finances, with a growing
number of homeowners
failing to pay their
mortgages on time.
Diana Clement reports
CREDIT AGENCY Centrix
says 18,800 mortgage accounts
missed a payment in July this
year – a 31 per cent increase on
July last year.
The figures, which are lower
than March when 19,300
accounts were reported as past
due, come amid a new round of
hikes in mortgage interest rates.
ANZ, ASB, BNZ and Westpac
have all bumped up their home
loan rates over the past weeks,
with standard rates for one-year
and two-year terms above 7 per
cent and stretching towards 8 per
cent.
The jumps mean homeowners
who are now rolling onto higher
rates are having to find on
average more than $1200 extra a
month.
For some homeowners, the
cost of servicing their mortgage
could be a lot higher. Centrix
says 240,000 mortgage-holders
in New Zealand owe more than
$500,000 to their lender, with
42,500 owing less than $50,000.
Data released by the Reserve
Bank in July shows that the
number of homeowners adding
to their mortgage, to fund
big ticket purchases or home
renovations, has nearly halved
since 2021.
The value of mortgage top-ups
in the 12 months to July was $7.7
billion, down from $13.6 billion
in the 12 months to July 2021.
It’s a trend that mortgage
advisers are seeing in their dayto-day
work.
Mortgage adviser Neville
Modlin from The Lending Team
said rising interest rates had led
to a decline in top-ups, with
many homeowners worried
about how to meet existing
payments. Other
factors included
an increase
in bank test
rates and the
October national
election. Also
Neville
Modlin
likely to have
had an impact
was Cyclone
Gabrielle and
the Auckland floods, which will
have resulted in some renovation
work requiring top-ups being
covered by insurance claims.
Loanmarket adviser Rodney
King suspects that there may be
an even greater drop off in topups
for renovations such as new
kitchens or extra rooms than the
Reserve Bank
numbers suggest.
“The top ups
we are seeing
[tend] to be for
energy efficient
purposes, such as
hybrid/EV cars,
solar panels or Rodney
double glazing King
to homes, taking
advantage of banks’ various
offers to encourage these loans,”
he said.
However, Jeff Royle, adviser
at iLender.co.nz, thinks some
borrowing has moved from topups
to general
refinance, with
borrowers going
to new lenders
to get cash back
offers or better
terms.
He said that
while there
was not a lot
of difference in interest rates
Jeff Royle
between lenders, there was quite
a difference in how the banks
calculate income.
Campbell Hastie, of Hastie
Mortgages Ltd, said client topups
had dropped off.
“In terms of numbers, it’s
about 40 loans [last year] and
15 loans now, so quite the drop.
Most of these loans are under
$100,000 - more like $20,000 to
$50,000,” he said.
“With interest rates going up
and the cost of living going up,
I think people are more focused
on getting by than trying to do
more. Joe Public has also got
the message that the CCCFA
[Credit Contracts and Consumer
Finance Act] meant their KFC
DEBT: This graph
shows the number
of mortgages in
New Zealand by
debt size. While
only 2.7 per cent of
mortgages are $2
million-plus, just 15
per cent are for less
than $500,000.
habit would kill their chances
of getting a loan. While things
have softened in that regard,
the message is still in people’s
brains,” Hastie said.
“Put those things together
[and there is] less demand for
top ups, and lending full stop.
Are Kiwis focused on paying
their mortgages off instead? Not
as such. Focused on getting by
rather than focused on principal
reduction is probably more
accurate.
“We are seeing more lump
sum payments at refix time
than in previous years, [with]
similar sized amounts to your
average top up, such as $20k
to $50k. People
with cash lying
around are not
spending it: they
are either holding
it in reserve or
dropping it into
Campbell
Hastie
the mortgage
which helps soften
the blow.”
He is also seeing more “green”
loans for hybrid/electric cars or
solar panels. Canstar general
manager Jose George , said
surveys showed New Zealanders
were in a “hunker down” phase
right now.
“If Kiwis do find themselves
with some spare cash, overpaying
the mortgage is a smart move.
Every extra payment makes a
big difference to the interest
ultimately paid over the lifetime
of the loan,” he said.
“There are other ways to
crunch down the mortgage
repayments, too. For example,
if you are coming up for a refix
you can also lower the term of
the mortgage, which has the
effect of increasing payments and
decreasing interest over time.
“Refixing also gives you an
opportunity to repay a bulk
sum without being charged any
break fees. If you do have a bulk
amount you can repay now, it
will be worth checking with your
bank as to any break fees. There
may be none given we’ve been in
a rising interest rate market.
“If you’re nervous about losing
access to extra funds you can
always park them in a term
deposit or savings account. Term
deposit rates are really attractive
right now and offer safe, easy
returns. Given we’re in such a
difficult financial time, this could
well be a good option.”
– NZ Herald
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