tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
ANZ names its new CIO - find out who got the gig Dismiss
Last Article Uploaded: Thursday, December 7th, 12:54PM

Mortgages

rss
Latest Headlines

Household financial stress likely to grow: RBNZ

Pockets of financial stress among households are likely to grow in the medium term because of rising debt-servicing burdens, but most mortgage borrowers have kept up with their payments so far, says the Reserve Bank.

Wednesday, November 1st 2023, 10:19AM 1 Comment

by Jenny Ruth

It expects the effective mortgage rate, the average rate paid across all mortgages, will reach 6.4% by mid-2024, up from the low at 2.9% in late 2021, RBNZ says in its latest financial stability report.

“The average share of their disposable income going to interest payments is expected to rise from a low of 9% in 2021 to around 18% by the middle of 2024,” it says.

This is still well below previous periods of financial stress, such as in the late 2000s.

But “the adjustment to higher interest rates is likely to be felt more strongly by certain cohorts of borrowers.”

The central bank says this includes those who borrowed in 2020 and 2021 to purchase houses at high debt-to-income (DTI) ratios.

The central bank is continuing to develop DTI lending restrictions and banks are also getting ready for them and should have reporting and management systems in place so that DTI restrictions could be introduced by April 2024.

RBNZ plans to consult on introducing DTIs early in 2024.

“Measures of acute financial distress, such as loan arrears, have been steadily increasing over the past year but remain well below levels seen following the GFC.”

So far, households have been able to adapt by cutting discretionary spending and have also been supported by strong income growth, but more borrowers are likely to fall into arrears in the coming year.

But mortgage holders have been missing repayments on other debt at a greater rate than those without mortgages.

“This suggests debt-servicing strains faced by mortgaged households may be greater than shown simply by mortgage arrears.”

RBNZ says while shorter-term mortgage rates have continued to climb, longer-term rates have generally stabilised in the last six months.

It notes banks' test interest rates used to assess prospective borrowers' ability to pay have increased only slightly from 8.75% to 9% while median house prices have dropped from about 11 times incomes to about nine times, reflecting rising incomes.

Prices relative to incomes has dropped more strongly in Auckland and are back to 2013 levels.

Tags: RBNZ

« Struggles with debt for most KiwisRBNZ coy on DTIs but plans public consultation »

Special Offers

Comments from our readers

On 1 November 2023 at 2:00 pm Amused said:
"The central bank is continuing to develop DTI lending restrictions and banks are also getting ready for them and should have reporting and management systems in place so that DTI restrictions could be introduced by April 2024."

CCCFA changes all over again if DTIs are introduced and they are set at the level that the RBNZ want them at. This will kill the market and as someone else noted just push more people to 2nd tier lenders outside of the main banks for finance.

DTIs would be another monetary policy disaster from the RBNZ adding to their growing list of failures now which have negatively impacted New Zealanders. Hopefully the new Government aren't foolish enough to trust the advice coming out of 2 The Terrrace, Wellington. Something tells me that Adrian Orr and Nicola Willis aren't going to be friends.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.69 7.49
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 7.09 6.89
ASB Bank 8.64 ▼7.39 7.05 6.85
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.35 7.05 6.85
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.95 7.65 7.45
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.10 - -
Co-operative Bank - Owner Occ 8.40 7.30 7.05 6.85
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.80 7.55 7.35
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.99 6.85 6.65
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 8.05 7.79
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 7.05 6.89
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.75 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 8.05 7.65 7.29
SBS Bank Special - 7.55 7.15 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.89 7.65
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 7.09 6.85
Unity 8.64 6.99 6.99 -
Wairarapa Building Society 8.60 7.15 6.94 -
Westpac 8.64 7.99 7.59 7.35
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.39 6.99 6.75
Median 8.64 7.45 7.40 6.87

Last updated: 7 December 2023 9:28am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com