The Reserve Bank of New Zealand (RBNZ) has indicated that most households are currently managing higher mortgage repayments, and the banking sector r
The Reserve Bank of New Zealand (RBNZ) has indicated that most households are currently managing higher mortgage repayments, and the banking sector remains strong. However, the RBNZ’s half-yearly Financial Stability Report (FSR) noted an increase in the share of mortgage arrears, although from relatively low levels. The report also predicts that in 2024, up to 18% of mortgage holders’ incomes could be spent on interest repayments, signaling potential challenges for borrowers as interest rates rise.
Mortgage broker Bruce Patterson believes that many homeowners are already feeling the strain of higher rates. He anticipates that more homeowners will struggle to meet their mortgage repayments next year, especially when coupled with the rising cost of living. Patterson suggests that the RBNZ’s estimate of 18% might be conservative, as some individuals are already spending as much as 50% of their incomes on mortgage repayments.
Although some homeowners have shifted to interest-only repayment options, Patterson suggests that the RBNZ should consider lowering rates sooner rather than later to ease the financial burden. Despite these challenges, banks are said to be willing to assist borrowers. However, with rising interest rates and an unemployment rate that is a concern for some borrowers, 2024 is expected to be a tough year for certain homeowners.
