Mortgage broker Bruce Patterson believes many will struggle with rising costs. Photo: RNZ
The Reserve Bank (RBNZ) says most households are managing higher mortgage repayments and the banking sector remains strong.
However, the half-yearly Financial Stability Report (FSR), released on Wednesday, said most households had been able to manage higher mortgage repayments, although the share of mortgage arrears had increased from low levels.
Despite this, the RBNZ did acknowledge an increasing number of borrowers would face "significant debt servicing stress" as they moved on to higher interest rates. The report predicted 2024 would see up to 18 percent of mortgage holders' incomes being spent on interest repayments.
Mortgage broker and director at Loan Market, Bruce Patterson, said people could only manage so long, with an increasing number feeling the strain and more homeowners expected to struggle to meet their mortgage repayments next year.
Patterson believed homeowners would only be able to absorb so much. He said a "double whammy" of cost of living, coupled with higher mortgage rates, would eat into their incomes very quickly - making 2024 a challenging year,
"It's all very well for the Reserve Bank to say people are coping, but they're the ones that created this issue and I think it's gonna come home to roost next year.
"We're already seeing it with some companies going under and redundancy, so we're going to see that unemployment level climb as well, which will exacerbate the problem.
"The Reserve Bank wants higher unemployment and it'll only be at that point that they might look at bringing rates down again."
Patterson said the RBNZ's figure of 18 percent was conservative, claiming some people were spending 50 percent of their incomes on mortgage repayments and would be hardest-hit by future rate hikes.
While some were coping by switching to interest-only repayment options, Patterson believed the RBNZ should drop rates sooner rather than later.
On lenders, Patterson says they were willing to help where they could.
"We're having a lot of enquiries from clients and yes, the banks are geared up for this - they realise that it's important that they address it early, so they are being very cooperative just around helping their clients, which is really good to see."
With interest rates biting, the unemployment rate was also bearing down on some of Patterson's clients.
"We've had some redundancies, most people are able to find other employment relatively quickly, but you know the more that that happens the less opportunities there will be and certainly in the trade sector the amount of workers is reducing.
"It's very early days, but I do expect 2024 to be a very tough year for some of our clients."
