NZ CRISIS: Homeowners expect to struggle when the OCR goes higher

PHOTO: New Zealand is being driven into the ground. FILE

Economic stress is taking its toll on the housing sector, with mortgage brokers concerned potential repayment increases will significantly stretch household budgets.

100 Most Influential Real Estate Agents | NOW LIVE

It’s predicted the Reserve Bank will keep lifting the official cash rate, with latest inflation figures showing price rises are not easing.

Homeowner Sara Ruffell said further rates increases would cause serious pain to the pocket.

“We’ve only been in our current home since the start of June so we are fixed until May on 4.75 percent but I have definitely been keeping a close eye on the OCR and the changes to the interest rate. If they stay as they are we are going to be looking at an extra $100 a week on our mortgage.”

An increase in her mortgage repayments would also raise stress levels in the household.

RENTS are through the roof at 7.5% more | Trade Me

“If you add on another 100 [dollars] per week in mortgage repayments, it’s at the point where we have to start looking at where we take that money from.”

Sacrifices would need to be made, she said.

“It’s going to be things like when we go to the supermarket we are going to have to have a set budget and a meal plan for the week.”

Further increases would mean more non-essentials falling by the wayside.

“We’ve got three kids; we are going to have to look at restricting the sporting and extra curricular activities they want to do. Money is not endless.”

Ruffell said her whānau were looking at alternatives such as tiny homes.

“We both work full time. I think we will definitely be struggling, it will be harder for us for sure.”

Home Owners and Buyers Association of New Zealand president John Gray said he was seeing a perfect storm of rising interest rates and falling sales.

Decade-low sales volumes and fast-falling home values | CoreLogic NZ

“There is huge anxiety amongst home owners facing significant increases in mortgage repayments. A lot of them would be otherwise considering selling to ease the pain but of course it is a difficult time to sell as well.”

Many home owners were actually in a negative equity situation, Gray said.

“A lot of the value is being lost in existing properties that have mortgages over them, and we have certainly seen members significantly suffer as a result of the falling values.”

It’s a difficult time to sell a property, an expert says. Photo: RNZ / Angus Dreaver

Inflation’s flow-on effect feared

Mortgage advisor Bruce Patten said the biggest issue for homeowners was that inflation has remained higher than expected.

“Which means it’s likely rates will go higher than expected and the flow-on effect is going to be more costs for all mortgage holders really, right across the board.”

He had been fielding a number of inquiries from clients about when they should fix ,but that was like asking the length of a piece of string.

“If you’ve got good affordability and you can afford to fix for 12 or 18 months you may find they are having to unwind some of these interest rate increases. We are suggesting mid-2024 so it’s just how you handle this additional cost for the next 12 to 24 months.”

Real estate agent commissions SLASHED

Patten believed the housing market would become more subdued in the coming months.

“You know there is not that speculative element to the market, you haven’t got people buying houses, doing them up and flicking them on. So there is certainly not that turnover we have seen in the last two years so I expect it will stay the same for the next year at least.”

Many people with a fixed loan would be coming off it soon and may not feel the pain for six months or so, Patten said.