A young family Auckland who bought a home two years ago say it’s “extremely tough” to be facing a doubling in interest payments on their mortgage.<\/p>\n
Mortgage interest rates reached a low of 2.25 percent in 2021, but with the Reserve Bank hiking the official cash rate in an effort to curb inflation they are now hovering near 7 percent.<\/p>\n
Rory O’Sullivan told\u00a0Morning Report\u00a0<\/i>he and his wife had become spreadsheet experts in the past few weeks as they prepared to refix their mortgage.<\/p>\n
“This is money that hasn’t been there before that we’ve suddenly got to stump up and find from somewhere,” he said.<\/p>\n
“We’re on 3.5 percent – so still a little bit above those really lowest ones – but that’s going to pretty much double. It will depend on the term that we end up going for but we’re looking at a 6.7 percent interest rate.”<\/p>\n
He said they were facing having to find nearly $2000 a month extra for interest alone, and had to use “a lot of creativity” in budgeting to make it work.<\/p>\n
“We’ve gone through with a really fine-toothed comb in terms of what are the non-negotiables in terms of outgoings, what are the things that we can genuinely, actually bring down.<\/p>\n
“Since November we’ve anticipated this, obviously, and we’ve been engaging a new mortgage broker. All sorts of advice and help and seeing what we can do, because at the moment we can’t afford that.”<\/p>\n
Westpac’s latest economic analysis found<\/a>\u00a0half of all fixed-term mortgages in New Zealand will come up for repricing in the next year, as the economy tips towards recession.<\/p>\n It expected increased unemployment, and businesses have\u00a0some of the lowest confidence on record<\/a>.<\/p>\n It all points to less spending from households and businesses alike: exactly what the Reserve Bank is aiming for to help slow inflation.<\/p>\n O’Sullivan said there were some things the family were unable to cut back on – like childcare for their two young boys, which was also becoming more expensive – but they had found some ways to free up cashflow.<\/p>\n “We’ve been given options for interest-only, adding on top some of our credit card debt as well, but then it just gets eyewatering, looking at about 8.09 percent with a non-bank lender.”<\/p>\n Some of their solutions included stopping payments into Kiwisaver, and finding a lower-interest credit card “because frankly for the last two years, or the last year certainly, we’ve only really been able to meet minimum repayments on the cost of living”.<\/p>\n “We’ve got about a week to go until we want to to get that new rate locked in, but we’re doing just whatever we can … it’s become anxiety-riddling, I’d say it’s been really really daunting.”<\/p>\n He said there would be many other in the same difficult position.<\/p>\n “We are not the only ones in this boat, it’s just serious trouble for a lot of people.”<\/p>\n “That’s actually, yep, extremely, extremely tough.”<\/p>\n There may be hope on the horizon for lower interest rates, with\u00a0high inflation overseas starting to come back under control<\/a>, and signs of softening in domestic labour markets.<\/p>\n