Mortgage payments rearranged as living costs spiral

New research from Canstar shows that nearly one in five mortgage holders have negotiated with their bank to find ways to reduce their mortgage payments.

Wednesday, April 19th 2023, 8:00AM

by Sally Lindsay

New arrangements include mortgage holidays, longer mortgage terms and interest-only payments.

The research also reveals the extent Kiwis are cutting back on lifestyle choices in order to balance their budgets amid the cost of living crisis.

ASB research shows consumer spending is under pressure and will add $150 per week to household costs this year.

Chief economist Nick Tuffley says there is still a considerable amount of lagged monetary tightening that will come through. The bank estimates the average mortgage rate households are paying is only halfway to the peak.

As a result of the rise in cost of living expenses, an extraordinary 60% of mortgage-holders say they have pulled back on non-essential costs, with the majority saying this has led to reduced spending on dining out, entertainment and fashion items.

Another one in five say they have cut back on both essential and non-essential costs, including groceries and car usage.

Canstar general manager Jose George says the research underlined the pressure on Kiwi households, and the benefits of working with home loan providers.

“At times like this, people should step back and consider all their household outgoings, and if new arrangements can be made.”

He says it is a good time for mortgage holders to consider if they are with the right home loan provider, or have the right mortgage structure.

“It’s not necessarily easy to change banks, but it may be worth exploring. There are also ways to cut back on home loan repayments, such as negotiating with the bank if you are about to refix your loan, or structuring your debt differently.”

Canstar’s Consumer Pulse survey also shows there has been a big decline in residential mortgage debt. First home buyers (FHBs) took on $815 million of debt in February, compared to $1.1 billion two years ago. A slowing market and fewer investors mean they now make up a higher percentage of the overall market at 21.3%.

However, significant numbers of prospective FHBs also appear to have dropped out of the market. In 2021, nearly half, or 48%, of 30-somethings said they were potential FHBs. That figure is now 33%.

Fewer people in their 40s also consider themselves potential FHBs, the percentage dropping from 38% in early 2021 to just over a quarter now.

Canstar has named TSB the winner of its Bank of the Year, Home Loans award. The bank also scooped Bank of the Year, Credit Cards, and won as a result of its competitive offers and customer satisfaction ratings.

George says TSB offers highly competitive home loans for both residential and investment properties, which contributed to the win. It also rated extremely well in customer satisfaction, which considers factors such as service, communication and value for money. “At a time of such intense financial pressure, this makes a huge difference,” he says.

Canstar’s panel assessed 12 providers to find the winner of Bank of the Year, Home Loans. Each provider is given ratings for the price and features of its products. Those ratings are then taken into account, along with the customer satisfaction surveys, to find the winner.

Tags: Market Close mortgages