Despite the massive increases in mortgage interest rates seen between 2021 and 2023, nearly 40% of Kiwi mortgage holders are still AHEAD with their loan repayments.
This is according to the latest Retail Banking Insights publication from banking industry body the NZ Banking Association (NZBA).
The data covers the period from January through to June this year - so, just before mortgage rates started to come down significantly.
It shows that as of June there were 1.38 million home loans across 1.14 million customers, with an average loan value was $318,151, while the average home loan value for first home buyers was $472,361.
Of the home loan customers, 1.4% of them were behind on their repayments. This is an unchanged percentage from the same data series a year ago.
In the six month period to June 2024, there were 13,095 home loans switched from principal and interest payments to interest-only, but that is down from 16,167 figure reported in the six months to December 2023.
Separately, Reserve Bank (RBNZ) figures show that about 2 billion (0.6% of the mortgage pile) mortgages as of August were classified as non-performing. This figure has, after rising sharply in the previous year, levelled off in recent months.
To me this is painting a picture of Kiwis for the most part handling the sharp increases in payments they would have faced since 2021, pretty well.
And there is the matter of some 39.7% of mortgage holders, according to these new NZBA figures, that are paying more than their minimum repayments.
Mortgage clearly comes first.
That figure of those paying more than the minimum is in fact down though. Two years ago the NZBA was reporting that for the January-June 2022 period some 45.8% of mortgage holders were ahead of minimum repayments.
So, the percentage is down a little, but, for me still remains surprisingly high and with mortgage rates now coming down and more cuts likely, it suggest the 'worst' is over.
NZBA chief executive Roger Beaumont acknowledges that some people are experiencing financial difficulty in the current economic conditions.
However, "despite these headwinds, the vast majority of New Zealanders are managing their financial situation well", he says.
The NZBA figures show that there are 9.86 million unique banking customers. Of those, 9,267 customers applied for hardship status, up 1% from the period between July 2023 and December 2023. 5,968 customers were granted hardship status, up 6.9%.
Of the 2.23 million customers who had a credit card, they had an average monthly card spend of $2,072, which was virtually the same as in the six months to the end of December.
However, in the latest period, 67.2% paid off their monthly balance in full without incurring any interest cost, up 0.6% compared with the previous six months.
NZBA's Beaumont said savers had continued to make the most of raised interest rates from January to June, with the average interest rate on term deposits sitting at 6.1%.
"That will now likely decline with the Reserve Bank moving in August to start reducing the official cash rate. The next OCR update due on Wednesday is also widely expected to bring a further decrease."
The value of term deposits increased between January and June by 6.6% to $183 billion, with an average balance $107,800.
10 Comments
That's great news. Our unemployment rate is still low by historical standards, which ensures households can afford debt servicing costs and repayments, even if they have to cut back on discretionary spending.
Not a big fan of this government but the Fast-track Consenting list it could provide a much-needed boost to struggling sectors such as technical services and construction.
At what cost? A distorted market? Wasted taxpayer money? Smaller technical services and construction firms being shut out of the market. Even bigger mortgages for banks as prices are kept artificially high? I could go on. The unintended consequences that most won't see until after the event are considerable.
Sorry, my glasses are not so rose tinted.
Let's not get too carried away patting ourselves on the back.
First off, the NZ Banking Association (NZBA) is the banking industry's key lobby group. So the spin is huge.
Second off, they're reporting we are so beholden to banks that we prioritise all spending towards bank repayments first. Is this a good thing? Or should we prioritise other things before their profits? Or perhaps the bank's arrears practices are so draconian and predatory we have no choice?
Thirdly, the NZBA really has no interest in what mortgage holders are sacrificing to ensure their member banks keep making outrageous profits based on fat margins. How many are forgoing doctor visits, quality foods, school fees, school trips, holidays seeing relatives, financial help to family members, donations to worthwhile charities, clothes and shoes, etc so the banks continue making outsized profits?
Sorry but your comment makes it sound like the banking system is unilaterally responsible for the entire mess and borrowers should take zero personal responsibility for signing on the dotted line of the loan agreement. In good times, let's all pile on more debt to buy a house we cannot afford because a bank is willing to throw us a generous line of credit.
"What could possibly go wrong in 25-30 years of the payback period? There is zero chance that the economy sours my job, interest rates go up or both over that long timeframe.
And who needs savings when I have all this equity built in a house that I cannot liquidate during tough economic times!
Let's put logic aside when making the most important financial decision of our lives and impulsively try to outbid all others bidding for our "dream house"."
How many borrowers have had their loans modified from P&I to IO? The most recent 2 years according to the article would total 29292. Multiplied by only the average 318k balance gives you 9.3 billion. Would those loans now be otherwise non performing if the modification to P&I had not been given?
Add 9.3b to the 2b acknowledged as non performing and that gives you 11.3b. or 3.4% non performing.
Just as well the banks make all their own rules.
People are paying their mortgage because the my don’t want to be homeless. Many people have stopped paying for things they enjoy, like sports and family vacations.
While it may be a positive for the bank, the declining standard of living is what matters to people.
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