Mortgage Mayhem: Almost 11,000 Kiwis Missed Their August Repayment
Thousands of Kiwis have let their mortgage repayments slip amid the COVID-19 pandemic, according to Finder, a home loan comparison site recently launched in New Zealand.
A Finder analysis of Reserve Bank data revealed that approximately 10,905 homeowners were in arrears with their mortgage payments as of 7 August, with over 240,000 payments missed since April.
This is in addition to the staggering 83,829 mortgage deferral requests lodged since the end of March – equivalent to 13% of all mortgages in New Zealand.
In response to the nation’s mounting mortgage debt, the Reserve Bank confirmed on 17 August that it will extend the home loan deferral scheme until March 2021.
Kevin McHugh, Finder’s publisher in New Zealand, said thousands of borrowers are entering into arrears every week.
“The Reserve Bank’s decision to extend payment deferrals until next March will bring much-needed relief to homeowners.
“The mortgage market shows just how much financial stress New Zealanders are experiencing. This is the fourth month in a row that a huge number of households were unable to pay their housing bill on time and in full – it’s a grim situation,” McHugh said.
In April 2020, the Reserve Bank lifted loan to value ratio (LVR) restrictions, allowing more buyers to enter the market with a deposit under 20%.
This means a higher proportion of recent buyers may now be faced with a high debt-to-income ratio.
McHugh said that the continued economic fallout of COVID-19 can lead to a debt spiral if Kiwis don’t act in time.
“Banks have supported borrowers with options like interest-only terms or deferred payments for up to six months, but some of customers are still unable to afford their regular repayments.
“With late fees tacked on, these borrowers may be even less likely to afford their next repayment, perpetuating a vicious debt cycle.
“Borrowers who have lost their income need to contact their lender immediately to avoid ending up in arrears,” McHugh said.
Hardship assistance options for home loan customers:
Defer your loan repayments.
The Reserve Bank has confirmed that eligible home loan customers can defer their repayments until March 2021. Planning to hit pause on your repayments? Keep in mind that interest may continue to accrue during this time, and this amount will be added to your outstanding balance.
Switch to interest-only repayments.
If you’ve been paying off a principal and interest loan, you may be able to temporarily switch to interest-only repayments. While this will reduce your monthly repayment amount, you’ll only be paying off the interest portion of your loan, and your repayments will likely be higher at the end of the interest-only period.
Pay the minimum amount.
If you’ve been paying above your minimum repayment amount, you can lower your payments back down to free up cash. You can adjust your mortgage repayment amount via Internet banking or call up your lender.
Not all banks or financial institutions may be offering the above, so make sure to check with your lender first.