As home values record their biggest drop in 14 years and real estate agents watch sales decline, experts explain how the power is shifting to buyers. Video / NZ Herald
A mortgage holder unable to bear rising interest rates pleaded with Kiwibank to extend its loan to 30 years so it could afford it, but the bank refused – so it is forced to sell.
But a Kiwibank spokesperson said the bank was working closely with customers, proactively monitoring affordability and had a tough process to help people, but hadn’t seen any major increases in defaults. of payment.
Extending the term of a loan to 30 years might not be in people’s best interests, the bank spokesman said.
“Under the responsible lending rules, we encourage our clients to reduce their debt over time. Extending a mortgage to 30 years, as interest alone cannot be considered responsible lending,” said the spokesperson.
The owner’s mother spoke to the Herald about her daughter’s plight after it was reported that Ray White Remuera had a specialist agent working with lenders on mortgage sales.
The agent, Cherry Killgour, said: ‘Obviously the banks work with the owners.
She has locations in New Lynn and Lynfield listed for mortgage sales after lenders called loans. Killgour runs a specialist service to help sellers of mortgages and this service operates nationally. Assessments of distressed sales outside Auckland were underway, she said.
But the mother said that has not happened for her two daughters, who are both struggling financially.
“One comment resonated that ‘banks work with people’. This is absolutely incorrect. Both of my daughters have or are facing increased mortgage repayments that are out of their reach, but the bank responded with a resounding no to extending their mortgages to 30 years/interest only,” the mother said.
Both women have Kiwibank mortgages.
The Kiwibank spokesperson said New Zealand has been in a low interest rate environment for a long time.
“Now we are in a rising interest rate environment and we are seeing more normal levels. Many home loan customers will face higher interest rates as their loan rolls over. We proactively monitor affordability and fortunately we see our customers making smart choices, especially around discretionary spending.To date, Kiwibank has not seen any significant increase in defaults on home loans. within normal seasonal levels,” the spokesperson said.
The bank had a clear hardship process to cover short-term changes in circumstances such as job loss, a medical event or the arrival of children.
“If customers need help, we will work with them to identify the best option for their situation at that time. It’s really important for customers to be honest with their bank about their life situation and to there is a change in circumstances so that we can understand their specific financial situation and what their income and expenses are,” the spokesperson said.
Hardship support options could include interest-only extensions, deferred payment terms and a term extension, she said.
The short-term mortgage support gave most clients time to restore their income or find alternative employment so their loans could be put back on a reasonable repayment schedule, she said.
But the mother said a daughter’s family had been reduced to one income with young families / the imminent arrival of a baby.
“Their emails or phone calls were met with a direct no and no advice, assistance, or compromise was even suggested by the bank,” the mother said of Kiwibank’s response.
The two daughters repaid the capital and interest. The only reason the two owners asked to switch was that the loans were about to be renewed.
“Rising interest rates are out of their reach. A daughter’s house has been and still is on the market because the bank offers no assistance to extend the term of the loan or only pays interest for a short time,” the mother said.
She offers financial assistance to the two girls.
“I just wanted to draw attention to the fact that both received a resounding no to their requests. The bank offered no help,” the mother said.
At the beginning of April, mortgage borrowers with at least 20% equity could qualify for a special one-year term of 3.99% with Kiwibank or 4.55% over two years.
But in June, the bank raised its one-year rate from 4.85 to 5.19% and its two-year rate to 5.69%. Today, it is announcing a three-year fixed rate at 5.89% and a special one-year rate at 4.95%. Variable rates, however, are 6%.
Trade Me today lists 17 places for mortgage sales in New Zealand – houses and land.
Nick Goodall, research director at CoreLogic, sees only a slight increase in mortgage lender sales.
“There were 21 mortgage sales in the second quarter of this year, compared to an all-time low of six sales in the previous quarter. In a long-term context, we are still well down on average. The peak was after the global financial crisis with 777 sales in the third quarter of 2009, so we’re a long way from that,” said Goodall.
The Herald’s debt series showed that home debt has grown at a slower rate over the past year, but the cost of servicing that debt has risen sharply.
Reserve Bank data showed home debt rose 6.9% to $339.41 billion in the year to May 31, much slower than the 11.5% growth there. a year ago.
But at the same time, one-year fixed-term rates rose from a record low of 2.25% to over 5%.