Key Facts:

– Homeowners who purchased in 2021 and 2022 at around 3% interest rate may see their interest rate double to about 7% when they refix their mortgages next year.
– 54% of all mortgages are due to come off the fixed rate within the next 12 months, putting some households under pressure.
– One homeowner borrowed $1.3 million in January 2021 at a fixed three-year interest rate of 2.99%, but will need to find an extra $3500 a month when they refix at around 6.8% to 7% next year.
– Rising interest rates are making it difficult for first-home buyers to enter the market, with a client needing to pay $1200 a week just to cover the repayments on a $700,000 house with a low deposit.

Article Summary:

Homeowners in New Zealand are becoming increasingly concerned as they face the prospect of higher mortgage repayments when they refix their loans early next year. Current low interest rates are expected to more than double, with homeowners who purchased in 2021 and 2022 at around 3% interest rate now likely to pay about 7% on their loans. This increase in interest rates may pose financial challenges for many, with some borrowers having to find thousands of dollars more each month to cover their repayments. Some homeowners are having to cut back on spending or take on second jobs to make ends meet.

The high interest rates are also creating difficulties for first-home buyers, making it harder for them to enter the housing market. The rising interest rates mean that buyers with low deposits would have to pay significantly more each week to cover the repayments on their loans. Despite these challenges, so far, there have been no mortgagee sales or non-performing loans on the banks’ books.

While the increase in interest rates may cause financial strain for many homeowners, there are options available for those who are struggling. Borrowers can switch to paying interest only, extend the term of their loan, or take a break from repayments. Banks also seem more willing to negotiate with brokers to provide lower interest rates than the advertised rates. However, it remains to be seen how borrowers will navigate these changes and whether they will impact the housing market in the long term.

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