Northland homeowners are having to rein in their lifestyles in order to meet hefty mortgage repayments caused by ongoing interest rate hikes.

With people having to re-fix their home loans as interest rates continue to
climb, and with the cost-of-living crisis lumped on top, some are making significant sacrifices, like selling off their boats and family cars.

Northland financial adviser Malcolm Shepherd, from Quantum Financial Advisers, said some families are struggling.

“When interest rates were 2.5 per cent, banks were testing about 5 to 5.5 per cent to ensure if interest rates went up you could still afford your loan.

“Now, a lot of those coming off these rates, the new rates are so high the tests are at 9 per cent.

“Affordability has shrunk dramatically.

“The cost of living on top of that has made it harder and people are struggling.”

Shepherd said with less disposable income, people are having to sacrifice things like petrol, and are cancelling subscriptions like Sky and Netflix.

They are also selling vehicles, downsizing from two family cars to one, and selling “toys” like boats.

“It’s nice to have a boat, but you have the fuel costs that go along with it.

“People don’t go for a drive any more. Instead of going out for a drive to explore or to take the kids for an icecream they’re going ‘let’s stay home and do something else’.”

Shepherd said having “good visibility” on where your money is going is crucial.

Now is an important time to talk to an adviser about how to stretch money further and pay off debt, he said.

“People need to take it as an opportunity to make some changes they’ve decided to do rather than the bank making changes for you.

“It’s a good time to review mortgages. A combination of a fixed loan and revolving credit can be beneficial.

“It’s not about interest rates really, how you set up your lending is much more important.”

According to the Reserve Bank, nearly half of Kiwis’ mortgage debt is due to be refixed between October 2022 and September 2023.

Interest rates have increased from around 3.5 per cent at the start of 2022, to around 6.5 per cent for one-year fixed term, meaning some borrowers are likely to see a big jump in their repayments.

Northland mortgage broker Sarah Curtis, from Sarah Curtis Mortgages, said some of her clients were concerned and had reached out to get support and advice.

Most were planning ahead for the next 12 months and had a “money plan” to get through this time of increased costs, she said.

“We have definitely seen fewer requests for top-ups for home renovations and cars than we had seen in the times when interest rates were lower.”

Curtis said knowing your finances was key. It was also important to communicate, she said.

Sitting down to review what you earn and what you spend can be “a big wakeup call”, she said.

“Looking to consolidate short term debts and closing down credit cards and buy now pay later facilities are always going to be things that will help you financially.

“Don’t bury your head in the sand, get in touch with an adviser or your lender to talk to them about your worries and find out what can be done to help.”

Whangārei Budgeting Service chief operations officer Adam Dade said in the last year 51 per cent of clients had “some form” of bank-related debt.

Of this, 73 per cent had specific issues with their home loans, he said.

“This is an incredibly high amount and highlights the fact that all types of people can reach out for financial mentoring at some stage of their life.

“We would encourage anyone who does have concerns about the impact a change of mortgage rate would have on them to come and see us, or another money advice service to try and prepare for the impact.”

Dade said it was important to understand your essential expenditure, and how this will change.

“Do a new budget and make sure you are focusing on needs versus wants and identify what you can cut if you have to.

“If you have other debt, check if you can consolidate or apply for a community loan to make the payments more manageable and affordable.”

A spokeswoman for ANZ said most of their customers were in a “sound financial position”.

People had kept up their savings habits and many took the opportunity to pay down debt while interest rates were low, so are ahead on their mortgages, she said.

“However, we know that many of our customers will roll off fixed home loans on to higher rates over the coming year.

“When that happens, some will be under financial pressure.”

For customers who are under financial pressure, there are steps they can take to manage their home loan.

This can include moving a portion of their lending to interest-only repayments, or extending the term of their loan, the spokeswoman said.

“We’re keen to talk with customers sooner rather than later if there are any signs of problems to see if, for example, we can structure their finances differently to relieve some pressure.”