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Mortgage stress builds on homeowners
Updated 11:59AM Monday February 04, 2008
Mortgage pressures are expected to force a growing number of people to look for less expensive homes in the year ahead.
The issue has been thrust into the spotlight following Australian research, predicting a sharp jump in mortgagee sales.
Australian Prime Minister Kevin Rudd said over the weekend he expects up to 40 per cent of homeowners to be facing mortgage stress in the coming year, with the Australian Reserve Bank poised to raise interest rates for the seventh consecutive time.
The base interest rates in Australia is currently 6.75 per cent, compared with 8.25 per cent in New Zealand.
Massey University banking lecturer Claire Matthews says we can expect a similar pattern here, as a growing number of homeowners struggle with higher interest rates.
"I think that's quite likely in the coming 12 months. It's certainly going to be a disadvantage for the property market. Things are going to start slowing down and that's already started happening," Ms Matthews said.
Kiwi property investor Olly Newland is also warning of tougher times ahead. He said people under huge mortgage stress tend to look around for something cheaper.
But with many others sharing the same idea he says the the cheaper market starts getting overcrowded.
"The evidence from all around the world, the UK, the United States and Australia says the credit crunch is coming and it's going to be coming to your neighbourhood soon and I don't see how we're going to escape that," Mr Newland said.
"We've already seen the credit crunch here through a score of credit companies collapsing. It's likely to see an increase in mortgagee sales, which is very sad indeed."
He said because interest rates on this side of the Tasman are so high - things could get messy.
The Reserve Bank of Australia board will meet tomorrow to consider raising rates to an 11-year high.
Most analysts are tipping another hike of 25 basis points to contain surging inflation, despite big cuts to official interest rates in the US.
when rates rise, it is not just homeowners that will feel the pain.
In Australia, Investors Club president Kevin Young warned a further rate rise could push up weekly rents by 10 per cent during the first half of 2008.
Unions have warned many households cannot afford further rises in home loan and credit card repayments.
Ms Mathews urged those in difficulty in New Zealand to see their bank manager as soon as financial stresses start.
She said the banks do not step in unless mortgage payments stop completely, but can be very accommodating if contacted before the payments stop.
- NEWSTALK ZB, AAP
Updated 11:59AM Monday February 04, 2008
Mortgage pressures are expected to force a growing number of people to look for less expensive homes in the year ahead.
The issue has been thrust into the spotlight following Australian research, predicting a sharp jump in mortgagee sales.
Australian Prime Minister Kevin Rudd said over the weekend he expects up to 40 per cent of homeowners to be facing mortgage stress in the coming year, with the Australian Reserve Bank poised to raise interest rates for the seventh consecutive time.
The base interest rates in Australia is currently 6.75 per cent, compared with 8.25 per cent in New Zealand.
Massey University banking lecturer Claire Matthews says we can expect a similar pattern here, as a growing number of homeowners struggle with higher interest rates.
"I think that's quite likely in the coming 12 months. It's certainly going to be a disadvantage for the property market. Things are going to start slowing down and that's already started happening," Ms Matthews said.
Kiwi property investor Olly Newland is also warning of tougher times ahead. He said people under huge mortgage stress tend to look around for something cheaper.
But with many others sharing the same idea he says the the cheaper market starts getting overcrowded.
"The evidence from all around the world, the UK, the United States and Australia says the credit crunch is coming and it's going to be coming to your neighbourhood soon and I don't see how we're going to escape that," Mr Newland said.
"We've already seen the credit crunch here through a score of credit companies collapsing. It's likely to see an increase in mortgagee sales, which is very sad indeed."
He said because interest rates on this side of the Tasman are so high - things could get messy.
The Reserve Bank of Australia board will meet tomorrow to consider raising rates to an 11-year high.
Most analysts are tipping another hike of 25 basis points to contain surging inflation, despite big cuts to official interest rates in the US.
when rates rise, it is not just homeowners that will feel the pain.
In Australia, Investors Club president Kevin Young warned a further rate rise could push up weekly rents by 10 per cent during the first half of 2008.
Unions have warned many households cannot afford further rises in home loan and credit card repayments.
Ms Mathews urged those in difficulty in New Zealand to see their bank manager as soon as financial stresses start.
She said the banks do not step in unless mortgage payments stop completely, but can be very accommodating if contacted before the payments stop.
- NEWSTALK ZB, AAP
