Rising costs drive repayment stress
New data from the Finance and Mortgage Advisers Association of New Zealand (FAMNZ) revealed that nearly 60% of New Zealand mortgage holders may be experiencing mortgage stress, defined as paying 30% or more of household income toward mortgage repayments.
Additionally, almost a quarter of borrowers allocate over half of their income to mortgage payments, highlighting a severe financial strain.
Financial situations worsen amid rising costs
FAMNZ’s 2024 Consumer Access to Mortgages report also finds that 37% of New Zealanders feel their financial situation has worsened in the past year, with most attributing this to increased costs in essentials, utilities, and interest rates.
“As borrowers roll off fixed rates, mortgage stress is a challenge many households are facing,” said Leigh Hodgetts (pictured above), FAMNZ country manager.
The recent official cash rate (OCR) cut may help, but Hodgetts noted there’s more to be done to boost consumer confidence in managing debt.
More borrowers use mortgage advisers
In positive news for New Zealand's mortgage adviser channel, the report showed that one in three (35%) of all borrowers secured their mortgage through a mortgage adviser. However, within the last 12 months this had risen to almost one in two (46%).
“This increase from 35% to 46% of channel market share highlights the growth in the mortgage advice channel,” the FAMNZ report stated.
In the last 12 months, 54% of borrowers worked with the direct or proprietary distribution channel of lenders. Most of these participants applied online directly with their lender, with less than 20% of those who secured a mortgage in the last 12 months applying directly at a bank branch.
This revealed a clear switch in focus to online applications over bank branches in the direct to customer channel.
Refinancing as a possible solution
The FAMNZ report indicated that one in four mortgage holders is considering refinancing, while 20% have already done so.
For some, however, refinancing isn’t feasible; over a quarter of stressed borrowers describe themselves as “mortgage prisoners,” unable to refinance due to strict servicing requirements or financial limitations.
Seeking advice for financial stability
Hodgetts encourages borrowers in this position to consult a mortgage adviser for potential solutions.
“There are many options for consumers that many people are unaware of, including some non-bank lenders that can only be accessed through an adviser.”
Looking ahead, Hodgetts remains cautiously optimistic.
“Another OCR drop is hopefully on the horizon, and consumers can start to feel more optimistic in exploring mortgage products that better suit their needs,” Hodgetts said.
Rising costs drive financial strain
The FAMNZ report underscores the impact of rising costs and high interest rates, showing that essentials, utilities, and interest payments are the leading drivers of financial strain.
With mortgage stress now a widespread concern, many households face challenges in maintaining financial stability.
What do you think of the FAMNZ report's findings about mortgage stress and the growing market share of mortgage advisers? Comment below
