"It's stress that is leading us to be better at budgeting," expert says
New Zealanders with a mortgage are cutting back on spending to make ends meet amid higher interest rates and inflation, according to the latest Canstar NZ report.
Canstar NZ’s latest Consumer Pulse report surveyed 7,679 people on their spending habits, and compared some of the answers with data the company collected between October and January to data from early-2021 surveys to measure changing trends over time.
The report showed that a net 66% of mortgage holders were pulling back on spending to meet higher mortgage repayments, with just under half of those reining in non-essential spending on dining out, entertainment, and clothes, while a further 21% were cutting back on essentials, such as groceries, electricity, and phone usage, RNZ reported.
The average two-year fixed mortgage rate is currently at 6.7%, up from 2.63% two years ago, while inflation remains near a record-high at 7.2%.
Jose George, Canstar NZ general manager, said people were feeling more confident about managing their money, with a net 62% saying they were living within their means – 44% higher compared to two years ago.
“It’s probably an after-effect of COVID-19, and the cost-of-living crisis is really difficult to avoid, so you’re sort of forced to be better with budgeting,” George said. “We’ve seen that the cost of so many basic expenses, petrol, or food, or mortgage repayments, they’ve all leaped up and as a side effect of that, you really need to become more smart with your financial management.”
Historically, New Zealand had low financial literacy levels and that needed to improve, the Canstar leader said.
“But the problem we’ve got is that it’s stress that is leading us to be better at budgeting, rather than the other way around,” George said.
There were some lessons that still had to be learned though, he noted, as a net 53% of respondents said they lived payday-to-payday.
Findings also showed that a net 47% didn’t have enough savings to get by for two months without an income, although this was already an improvement on 2021’s data, when 72% said they did not have the same financial buffer.
Those aged 30-40 appeared to be the hardest hit, with more than a quarter of respondents in that age bracket planning to reduce expenses to meet rising mortgage rate repayments, while those in that age group who had not bought their first home were dropping out of the market altogether.
“In 2021, nearly half (48%) of 30-somethings considered themselves potential first home buyers,” the report said. “But now, that figure is 33%, suggesting nearly a third have pulled the plug on the dream of homeownership, at least for the time being.”
That trend extended to those in their 40s, with the number of respondents considering buying a house dropping from 38% in 2021 to just over a quarter.
Data also showed that investing in the sharemarket has declined over the past two years. Back in 2021, more than 40% of those who were in their 30s and 40s were investing in the sharemarket, the most active investors of all respondents. That figure fell to less than 30% in 2023, RNZ reported.
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