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  • 150,000 households face mortgage stress

    150,000 households face mortgage stress
    By RUTH LAUGESEN - Sunday Star Times | Sunday, 25 May 2008

    Nearly 150,000 New Zealand households are at "extreme risk" of missing mortgage repayments and potentially losing their homes.

    They're part of a much larger group of almost a quarter of a million Kiwis or 22 per cent of people with a home loan who are in "mortgage stress", according to new research by Roy Morgan.

    Roy Morgan New Zealand finance industry director Mark Dansey said that would have severe consequences for the New Zealand economy because of the impact on retail sales and a general slowdown in all spending.

    Dansey said mortgage stress meant more than 30-45% of household income was being spent on mortgage repayments.

    The number of Kiwi households "extremely at risk" has jumped from 85,000 mortgage holders in 2002 (8.6%) to 147,000 last year (13.7% of all mortgage holders). This group was spending more than 30-45% of their income on interest payments alone.

    The jump in mortgage stress has been driven in part by interest rates that have climbed from 6.7% on a floating rate for new mortgages in early 2002 to 10.42% by December 2007. Real house prices have also risen 80% since 2002.

    The measure is on a sliding scale, with a household earning less than $60,000 judged to be under stress if spending more than 30% of its income on mortgage repayments, and a household on over $100,000 under stress if spending more than 45% of its income on mortgage repayments.

    And relief may be some time away as last week's Budget tax cuts may end up a bittersweet experience for these heavily indebted homeowners.

    Gains from tax cuts that begin on October 1 could be at least partially wiped out by delays in the Reserve Bank lowering interest rates, because of fears about the inflationary impact of the $10.6 billion tax package.

    A cut in the Reserve Bank's official cash rate of 0.5%, which had been expected in September, would have saved $19 a week on a $200,000 floating mortgage.

    Those cuts are less likely to go ahead because of the potential inflationary impact of the tax package, said BNZ chief economist Tony Alexander.

    Reserve Bank governor Alan Bollard will have to weigh up mixed signals that the economy is cooling, with growing job losses. Against that are the inflationary pressures from the four-year tax cuts package and from soaring oil prices.

    Last week's tax cuts will deliver cuts of between $12 and $28 a week for fulltime earners on October 1, rising to between $22 to $55 a week by April 2011. Working for Families payments will also rise from October 1.

    But Cullen told the Star-Times the tax package had been designed carefully to avoid interest rate rises.

    "The government is aware that for many people mortgage repayments are a significant stress right now. With the increase in food and petrol prices also hitting household budgets, the credit crunch could not have come at a worse time for families with mortgages," he said.

    National leader John Key now faces a fine balancing act in designing his own party's tax cuts, a package he has said will be announced five or six weeks before the end-of-year election. Asked if his tax cuts package would be bigger than Labour's, Key said "in some respects it's likely to be bigger, in others it's likely to be the structure and the design will be better".

    And he suggested not all New Zealanders would be better off under National's package. "I think there's no question that some New Zealanders will get more than they're currently getting under this package," he said.

    The Roy Morgan research is based on nationwide polling of 20,000 households in 2002 and 2007.

    http://www.stuff.co.nz/4559992a10.html
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    A question for Olly Newland......would the 150,000 households be around the 5% you mentioned in the Close Up interview?

    Also I'd guess the 'working for families' payments have not been factored into the 'household incomes' mentioned in this article so maybe less are affected.

    Cheers,

    Donna
    SEARCH PropertyTalk, About PropertyTalk

    BusinessBlogs - the best business articles are found here

    Comment


    • #3
      In Reply

      Donna
      I didn't write the article and have no idea how the figure was calculated.
      But if it was correct it wouldn't surprise me a bit.
      Last edited by OllyN; 25-05-2008, 04:00 PM.
      OllyN [email protected]
      Independent Property Consultant
      Residential and Commercial Solutions

      Comment


      • #4
        IF you are facing mortgage stress

        In recent weeks I have heard story after story of friends and family getting their new interest payments, e.g. a school teacher with a west auckland 3br, with a mortgage of $143000, extra repayments, $90 per week. He cannot put the ren up that much, and on a teachers salary what do you do?

        What if you have 2,3,4 such properties?

        I have gathered 3 professionals (lawyer, accountant, mortgage broker) together for a half day session to help people in this situation.

        If you are interested, see www.propertyeducationcentre.co.nz

        Comment


        • #5
          Originally posted by rustica View Post
          In recent weeks I have heard story after story of friends and family getting their new interest payments, e.g. a school teacher with a west auckland 3br, with a mortgage of $143000, extra repayments, $90 per week. He cannot put the ren up that much, and on a teachers salary what do you do?
          Sell it to me for $143,000. I will take it off their hands !!!!!!

          Comment


          • #6
            Offer

            ha ha I'll keep my ears open for you

            Comment


            • #7
              Originally posted by rustica View Post
              ha ha I'll keep my ears open for you

              Why do you laugh? If you are really trying to help people (for a nominal fee, no doubt) then you do them a disservice by not advising them of at least one viable option: free themselves of their burden by lowering the price, and selling their homes below market value, and buying back their mortgage.

              In the end, this is what is going to happen – no matter how hard you try to deceive these people into believing that they have other options. In a downward moving market the survivors are those who push the women and children aside and get to the lifeboats first. This is no time for heroes.

              Get out while you still can.

              Get out while the value of your home is still greater than your mortgage!

              Erewhon is still erehwon, I don’t see it changing anytime soon.

              http://exnzpat.blogspot.com/

              Comment


              • #8
                Originally posted by exnzpat View Post
                Why do you laugh? If you are really trying to help people (for a nominal fee, no doubt) then you do them a disservice by not advising them of at least one viable option: free themselves of their burden by lowering the price, and selling their homes below market value, and buying back their mortgage.

                In the end, this is what is going to happen – no matter how hard you try to deceive these people into believing that they have other options. In a downward moving market the survivors are those who push the women and children aside and get to the lifeboats first. This is no time for heroes.

                Get out while you still can.

                Get out while the value of your home is still greater than your mortgage!
                Perhaps the word deceive is too harsh. I’ll give you a break and assume that you are honestly trying to help people (for a nominal fee, no doubt). But, by giving you a break, I must assume, that you are only deceiving yourself – that there actually are other alternatives.

                Many New Zealand homeowners are up to their neck in this thing. Leveraged at 94%, 100% and in some cases 120%. This can only end one way – and it won’t be pretty.

                Erewhon is still erehwon, I don’t see it changing anytime soon.

                http://exnzpat.blogspot.com/

                Comment


                • #9
                  Or perhaps rustica was... wait for it..... joking.

                  My, you have an axe to grind, expat.

                  Comment


                  • #10
                    I'm assuming that selling up will be one of the options presented to these owners. There are buyers out there, mainly cagey old property investors who sold up in 2006 and have had their money sitting in the bank for two years. These people know that prices will fall, but they also like to have most of their money in property, and they can afford to take a long-term position. These people buy on price, and nothing else. The price is everything. An ad with "POA / Auction / Tender" will be ignored. So selling at slightly below current market value is a good option, in my opinion. You take a loss, and move on, wiser from the experience.

                    Comment


                    • #11
                      Options

                      Hi all

                      Yes there will also be Lease Options and Sandwhich Lease Options explained as well as a strategy to survive. Selling is obviously an option if they cannot (or will not) generate extra income until the market picks up again.

                      Who would people recommend as LO/SLO option who may be able to help attendees who need to move their property?
                      Last edited by rustica; 27-05-2008, 04:33 PM.

                      Comment


                      • #12
                        The problem is that the property is moved, but the mortgage is not moved. It's still there, having to be serviced.

                        Let that rich old bugger have the property. He'll do very well when he sells 20 years from now, when he's dead.

                        If anyone doesn't get my point, I can elaborate.

                        Comment


                        • #13
                          Originally posted by Green Fish View Post
                          The problem is that the property is moved, but the mortgage is not moved. It's still there, having to be serviced.

                          Let that rich old bugger have the property. He'll do very well when he sells 20 years from now, when he's dead.

                          If anyone doesn't get my point, I can elaborate.
                          Please do.
                          Erewhon is still erehwon, I don’t see it changing anytime soon.

                          http://exnzpat.blogspot.com/

                          Comment


                          • #14
                            Originally posted by rustica View Post
                            Hi all

                            Yes there will also be Lease Options and Sandwhich Lease Options explained as well as a strategy to survive. Selling is obviously an option if they cannot (or will not) generate extra income until the market picks up again.

                            Who would people recommend as LO/SLO option who may be able to help attendees who need to move their property?

                            The first place to start is a Home Budget and then move on from there.
                            Erewhon is still erehwon, I don’t see it changing anytime soon.

                            http://exnzpat.blogspot.com/

                            Comment

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