Some excerpts from the article:
Recent reports have warned of a ‘mortgage bomb’ that could blow up - and a growing number of people unable to pay back debts. Is the story as explosive as some headlines would have you believe?
“When you apply for a mortgage at those very low rates on offer through the pandemic, chances are you would have been tested at rates that are closer to where we’re at now,” Westpac’s Satish Ranchhod told Checkpoint this week.
“People are getting pay rises. Over Covid, we saw both businesses and personal customers really tighten their belts, improve their savings habits and paid down debts. Thirty five-odd percent of our home loans are more than six months ahead on their repayments.” [Says ANZ]
Interest.co.nz said the proportion of home loans in arrears on the first of May was lower than the 1.5 percent recorded at the start of March 2021.
Westpac told Bloomberg they’d seen an uptick in customers seeking financial support, but it said most of that was due to Cyclone Gabrielle in February. Kiwibank said it hadn’t seen a significant uplift in consumers requiring support.
BNZ said that less than half of 1 percent of its mortgages were in arrears for 90 days or more - far lower than the average of 1.9 percent in arrears back in March 2020. Bernard Hickey in his newsletter, The Kaka, said talk of a mortgage bomb was “reckless”.
Hickey said those most likely to be in a difficult position now would be those who took risks to buy properties which they did not currently live in.
“They are effectively … complaining about a government policy which made that investment choice riskier. That would be like saying the government should help out or bail out people who borrowed money to buy shares,” he said.
They’re lower than historic interest rates but property values are much MUCH higher. It’s much harder to service an $800,000 mortgage on 6% than a $100,000 mortgage on 12%.
The only people who have $800,000 mortgages are the people who bought recently. Most people bought their house at a higher interest rate for a lower price. And from the ones that did but a house in the last few years, many sold a house in the same market so their mortgage would have been a lot lower than a first home buyer.
Even so, I’d be curious to know what proportion of mortgage holders bought their house in the last 5 years.
This sort of mortgage has been common for years now in the main centres. It’ll be quite few people (me included).
It’s been common for people buying a house for a while, but many people own a house with a mortgage and have not bought a new one since these sorts of prices started. But the more I think about this, I think the proportion of mortgage holders who have bought in the last 5 years may be a lot higher than I first assumed.
It won’t just be fiat home buyers. People moving from Whanganui to Auckland would have been impacted.
The stats would definitely be interesting to see.