PHOTO: FILE
Kiwi Homeowners Grapple with Rising Mortgage Costs as Interest Rates Nearly Triple Over 15 Years
Over the past 15 years, the average Kiwi household mortgage repayment has nearly doubled, placing considerable financial strain on families across New Zealand. In recent years, the sharpest rise occurred between 2022 and 2023, where the average weekly mortgage repayment surged from $475 to $606. This increase has left many Kiwis, like Auckland resident Jackson Hapeta, struggling to make ends meet.
Kiwis Feeling the Pressure as Interest Rates Skyrocket
Homeowners like Hapeta have felt the impact of rising interest rates firsthand. After re-fixing his mortgage, the interest rate on his loan jumped from 2.5% to nearly 7%, resulting in a $1,000 increase per fortnight in his repayments. “We had to cut back on quite a number of things,” Hapeta explained. “We’re changing supermarkets, counting every dollar, and pulling back on family trips just to make sure we can pay our mortgage.”
Tauranga homeowner Fiony Vuleta is also facing financial challenges, with more than half of her family’s income going directly to mortgage repayments. Like many Kiwis, Vuleta’s mortgage has recently come off a fixed rate, pushing her family to use an entire income just to cover housing costs.
Mortgage Payments Devouring Household Budgets
According to the Finance and Mortgage Advisers Association of New Zealand, one in four Kiwi households now spends more than half of their monthly income on mortgage repayments. This significant portion of household budgets being directed to housing costs is creating challenges for many families who are hoping for financial relief in the coming months.
Country manager Leigh Hodgetts says many Kiwis are delaying re-fixing their mortgages, waiting to see if interest rates drop following the next Official Cash Rate (OCR) announcement. Hodgetts notes, “We are seeing people holding off just to wait and see, in hopes they might lock in a lower rate.”
Hapeta, like many homeowners, is closely watching these developments, especially with his mortgage due for re-fixing in the next six months. “It would really help our household if we could bring our mortgage repayments down,” he shared, adding that the financial relief would ease the burden on his family’s budget.
Adjusting to a New Financial Reality
For homeowners like Hapeta, the pressure of increased mortgage repayments has prompted lifestyle changes. “It has been stressful, completely changing lifestyle…learning how to grow vegetables and being more mindful about spending,” he said. Despite the positive learning experiences, the stress of balancing finances has been challenging.
Will Falling OCR Impact Mortgage Rates?
Economist and Infometrics chief executive Brad Olsen has offered insights into the economic outlook, forecasting that the OCR may fall from 4.75% to 4.25%. “Most economists expect the Reserve Bank to cut the OCR by 50 basis points,” Olsen said, although he noted that recent labour market data could potentially affect the size of the reduction.
Olsen explained that while mortgage rates have been declining slightly, it’s uncertain how much further they will fall in the near term. Banks may have already anticipated OCR cuts, with some reductions in fixed mortgage rates in recent months. For instance, while the OCR has only decreased by 25 basis points, some one-year fixed mortgage rates have dropped by nearly a full percentage point.
For Kiwis locked into high fixed-rate mortgages, the possibility of breaking these loans to secure lower rates is appealing. However, Hodgetts warns that break fees can be costly. “If you had a $600,000 loan and there was a 1% difference, that could add up to thousands of dollars,” she noted. She advises homeowners to carefully weigh the costs before making any decisions to refinance.
A Glimmer of Hope for Rate Relief
With the OCR cuts on the horizon, homeowners like Vuleta are hopeful that mortgage rates will drop enough to alleviate financial pressure. “Hopefully, when the OCR goes down and rates drop, that will take some of the load off,” Vuleta shared. For now, however, she and other Kiwis continue to adapt to an uncertain financial landscape, budgeting carefully and making adjustments as they await possible relief.
This mortgage situation has significant implications for Kiwi households, affecting everything from daily budgets to long-term financial security. As more families face high mortgage repayments, the pressure is on for policymakers and financial institutions to deliver meaningful solutions that support New Zealanders through these challenging times.
SOURCE: 1NEWS