Customers Use COVID-19 Lockdown To Pay Down Mortgages
Many home owners unable to spend money during lockdown diverted significant sums of money into extra repayments on their mortgages, new Westpac NZ data shows.
At the end of February, prior to lockdown, 65% of customers were ahead on their home loan repayments. Of those, the median customer was 8.6 months, or $8693, ahead in their repayments.
Four months later, at the end of June, 66% of customers were ahead on repayments, with the median customer 9.2 months, or $9521 ahead of the curve.
The repayments helped push the collective mortgage ‘buffer’ for Westpac NZ customers up by $401 million. Westpac NZ has 18.8% of the mortgage market.
Westpac NZ General Manager of Consumer Banking and Wealth, Gina Dellabarca, says the data shows the initial impact of COVID-19 on households varied.
“COVID-19 has caused real financial difficulty for some of our home loan customers through no fault of their own, and we have a great team working to support them through these challenging times.
“However, this data shows another group of New Zealanders were not affected to the same degree, and together managed to put millions of dollars more towards their mortgages as spending opportunities disappeared during lockdown.”
Ms Dellabarca says the extra repayments made through March, April, May and June were highest in Nelson (median - $1745), Wellington ($1660) and Auckland ($1482). Nationwide, the median figure was $828.
“Normally the increase in extra mortgage repayments is incremental so it’s great to see the numbers leaping forward.”
Ms Dellabarca says paying off a mortgage faster gives customers flexibility if they run into financial difficulty and also saves them more in the long run in reduced interest payments.
“It means they can decrease repayments and use the financial buffer they’ve built themselves should they need it.
“With interest rates much lower than where they were a year or two ago, we’d encourage anyone re-fixing their mortgage in the near future to consider the benefits of maintaining their future repayments at their present level if they are able to.”
Ms Dellabarca says COVID-19 has changed the financial outlook of almost all customers.
“For some people their income has dropped and they may have requested assistance through our mortgage deferral scheme while others have reduced their spending simply through concerns over the level of current uncertainty. For others, they remain on the same level of income and appear to be spending at similar levels at the same time interest rates have been dropping.
“Either way, the pandemic has allowed our team to have good conversations with our customers about their finances and plans for the future. We’re absolutely here to support our customers and understand how COVID-19 has affected them so we can help them through this next period.
“We encourage customers on mortgage or personal loan deferrals to talk to us if they no longer require this support so they can recommence payments and minimise the effect of the deferral on their future payments.”
Customers needed to be at least three months ahead in their repayments to be included in this data.