Squeeze on for mortgages

A significant portion of mortgage holders are reportedly concerned about the prospect of paying thousands more to service their mortgages as they come off two-year low-rate deals.

It’s estimated that 50 per cent of New Zealand’s mortgage holders are due to refix their mortgages in the next year, although there’s a dearth of hard data on how many Wairarapa homeowners fall into this category and what the effect on the region will be.

Real Estate Brands regional manager Rob Slater said that without insight into every individual’s financial situation, it is difficult to gauge local impact.

“However, I would assume that Wairarapa will be affected proportionally the same as the rest of New Zealand,” Slater said.

“This will include most, if not all, people having to move onto a higher interest rate than they were previously on.”

Research company HorizonPoll’s Banking Monitor – released on Thursday – said 70 per cent of mortgage holders nationwide are concerned about being able to afford future repayments.

It also suggested that three per cent of adults think they will have to sell a property in the next 12 months because of higher interest rates.

The Times-Age reported in April that mortgages were costing the average homeowner in Masterton 43 per cent of their household income, while those in Carterton were paying 46 per cent, and those in South Wairarapa a whopping 52 per cent.

Using an example of a refixed mortgage increasing annual repayments by $20,000, Slater said people in this position will be feeling the sting.

“Unless you have had a $55,000 pay rise [about $40,000 after tax], then your repayments are going to be more than the current 50 per cent
of the pay cheque in April.”

Even though some repayment hikes didn’t sound extortionate, Slater said it is circumstantial.

“Say you’re going from three to six per cent – what it means is you have to find twice as much money each month for your mortgage,” Slater said.

“That’s the bit that’s really going to start to hurt people.”

According to credit reporting company Centrix, in March there were over 12,000 mortgage holders in Wairarapa, with 6300 in Masterton, 2700 in Carterton, and 3100 in South Wairarapa.

Centrix data shows that this year, 1.72 per cent of mortgage holders in Masterton [or about 108 people] are past their payment dates – a significant increase over last year’s 1.01 per cent.

Carterton mortgage arrears have only increased slightly in the past year, from 0.85 per cent to 0.95 per cent.

The region’s biggest increase in mortgage arrears is in South Wairarapa, rising from 0.8 per cent last year to 1.66 per cent [or about 51 people] this year.

Slater said that although Masterton’s figures have nearly doubled in a year, an increase of less than three-quarters of a per cent [or 54 people] is hardly an alarming statistic given the size of the district.

“If I were a betting man, I would suggest that, unfortunately, this may continue to rise,” Slater said, “as people are faced with higher mortgage repayments, compounded by the already high cost of living we are all currently facing.”