Nearly 10,905 homeowners were in arrears, in addition to the 83,829 mortgage deferral requests since March
Thousands of Kiwis have let their mortgage repayments slip amid the Covid-19 pandemic, according to Finder, a home loan comparison site recently launched in New Zealand.
A Finder analysis of Reserve Bank data revealed that approximately 10,905 homeowners were in arrears with their mortgage payments as of 7 August, with over 240,000 payments missed since April.
This is in addition to the 83,829 mortgage deferral requests lodged since the end of March – equivalent to 13 per cent of all mortgages in New Zealand.
On Monday, Finance Minister, Grant Robertson announced the mortgage deferral scheme had been extended from September 2020 to March 2021 for those hit financially by Covid-19.
The initial scheme, which allowed people to defer payments on all residential mortgages for up to six months, was set to end on September 27 this year.
Kevin McHugh, Finder’s publisher in New Zealand, said thousands of borrowers are entering into arrears every week.
He said, the Reserve Bank’s decision to extend payment deferrals until next March will bring much-needed relief to homeowners.
The mortgage market shows just how much financial stress New Zealanders are experiencing. This is the fourth month in a row that a huge number of households were unable to pay their housing bill on time and in full – it’s a grim situation, McHugh said.
In April 2020, the Reserve Bank lifted loan to value ratio (LVR) restrictions, allowing more buyers to enter the market with a deposit under 20 per cent.
This means a higher proportion of recent buyers may now be faced with a high debt-to-income ratio.
McHugh said that the continued economic fallout of Covid-19 can lead to a debt spiral if Kiwis don’t act in time.
Banks have supported borrowers with options like interest-only terms or deferred payments for up to six months, but some of customers are still unable to afford their regular repayments, he said.
With late fees tacked on, these borrowers may be even less likely to afford their next repayment, perpetuating a vicious debt cycle. Borrowers who have lost their income need to contact their lender immediately to avoid ending up in arrears, McHugh said.
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