Key Facts

  • Economists cannot agree on whether mortgage rates have reached their peak, causing anxiety among home owners.
  • Westpac expects the official cash rate (OCR) to stay at 5.5%, while ANZ predicts a 25-basis-point rise.
  • Increasing costs of living, including food, petrol, and insurance costs, are putting extra pressure on homeowners.
  • Centrix’s January Credit Indicator Report noted a four-year high in mortgage arrears with over 20,000 mortgage accounts overdue in December.
  • The rising costs are causing some to lapse on their insurance payments and others to move onto interest-only loans for affordability.
  • Financial mentors are seeing more mortgage holders seeking assistance than before.

Article Summary

Recent uncertainty among economists regarding the trajectory of mortgage rates has heightened anxiety among homeowners. On one hand, Westpac expects the official cash rate (OCR) – the interest rate which the Reserve Bank of New Zealand charges on overnight loans to commercial banks – to stay at its current level of 5.5%. On the other hand, ANZ predicts an imminent 25 basis point rise, possibly followed by another hike in April.

The anxiety among homeowners comes in light of a backdrop of rising living costs, including food, petrol, and insurance. Additionally, a report by credit agency Centrix noted a four-year high in mortgage arrears with over 20,000 mortgage accounts overdue in December. Financial mentor David Verry expressed concern that mortgage arrears may be underestimated as many were debiting mortgage payments straight to overdraft, a deficit which isn’t reflected in mortgage statistics.

Further, Verry revealed that lapsing on insurance payments due to rising costs was becoming a problem, as homeowners risk breaching the terms of their loan agreements. Also, higher mortgage rates and the increased costs of living are causing outflows in interest-only loans, a trend not observed since the 2008 Global Financial Crisis. As homeowners struggle with the current volatility, financial mentors report an increased need for their services, previously a rarity.

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