Claims of widespread mortgage stress ‘plain wrong’ despite rising interest rates – commentator

A business commentator doesn’t think there’s widespread stress among homeowners with mortgages despite rapidly rising interest rates.

New forecasts by Infometrics have stoked fears interest rates will rise even higher than anticipated. It estimates the average mortgage rate currently being paid by households will increase from 4.2 percent to 5.7 percent by the second half of 2024 – well above the Reserve Bank’s prediction of the official cash rate (OCR) peaking at 4 percent.

Despite rising interest rates, Bernard Hickey, author of the business and economics newsletter The Kākā, told AM that doesn’t mean homeowners were struggling.

Asked by host Melissa Chan-Green if homeowners are in for more pain due to rising interest rates, Hickey said many homeowners already had significant equity.

“For most people who own homes, they’ve held them for quite some time – they have a lot of equity, they also have a lot of income.

“One of the dirty little secrets of our supposed ‘squeezed middle’… they’re actually receiving 10 percent more income than they received a couple of years ago so they’re actually ahead of inflation.

“There’s plenty of cash around and, actually, when you look at what’s happened to term deposits and cash accounts – there’s an extra $30 billion in cash sitting there that wasn’t there, pre-COVID.”

He said the total amount New Zealanders spent servicing their mortgages was very low.

“The people who have a home are in pretty good shape, even if their mortgage rates go up,” Hickey said. “The real stress is at the bottom end where people are renting, where rents are still rising 5-6 percent per year… They’re the ones where the real stress is and this winter is, obviously, an awful one for those people.