Nearly 50% of home loan customers are ahead on their repayments – NZBA

Data shows a significant rise in the number of mortgage holders shifting to interest-only payments

Nearly 50% of home loan customers are ahead on their repayments – NZBA

Many homeowners seem well and ready for significant rises in monthly mortgage payments, although some appear to be having it tough already, new industry figures have suggested.

Read more: Mortgage rates to range as high as 7.5% – Kiwibank economists

The New Zealand Bankers’ Association’s half-yearly Banking Insights, covering the six months to the end of December 2021, revealed that nearly half of the country’s homeowners with a mortgage were ahead with their payments and that more people sought “hardship” status with their banks in the latter half of 2021, but fewer were granted it.

The report used information collected and aggregated from NZBA’s 10 main retail member banks.

Roger Beaumont, New Zealand Bankers’ Association chief executive, said about 44% of people with a home loan were ahead on their repayments “likely because as interest rates have declined over the last few years, they may have retained their repayments at the same level,” reported.

“Depending on their loan, others may have increased their repayments further to get ahead and repay their loan more quickly,” Beaumont said. “This shows good financial capability among people with home loans. It also means they’re quite well placed in an environment of rising interest rates.”

The NZBA insights showed that 1.2 million bank customers have a home loan, with the average value of those loans at $296,000.

Read next: Home loan volumes fall 18% in two years

While 44% of customers were ahead with repayments as of December, 2% were behind.

NZBA said that 4,300 of the 1.2 million home loan customers were granted ”hardship” status over the six-month period, down 28% on the last period. Meanwhile, the number of customers who actually applied for hardship – and presumably didn't get it – rose 26% on the previous six-month period to nearly 7,600, reported.

The report also showed that about 1.3%, or around 15,500, of home loan customers switched from principal and interest to interest only, which is an increase of about a third from the previous six months.

About 56,000 new home loans were written from July to December last year, which was down about 20% on the amount of new loans in the first half of the year, NZBA said.

Those new loans had the average size of $407,000 – a 0.3% drop compared to the first six months of 2021. About a quarter of those loans were for first-home buyers.

The number of home loans on variable rates only has declined by a further 3.9% and now represents only 19.7% of all home loans; while customers with fixed-interest rates now represent 61% of all home loans, up 5% compared with the prior six months, reported.