New Zealand’s banks have promised to be sympathetic and supportive to borrowers who may face financial stress due to rising interest rates.
In its most recent Financial Stability Report, released earlier this month, the Reserve Bank of New Zealand said that while the financial system was in good shape (see previous story), rising interest rates would create pain for some households.
As a result, the Reserve Bank called on banks “to support customers facing stress”.
New Zealand Bankers’ Association chief executive Roger Beaumont said banks were “very conscious” of the impact current economic conditions would have on some people.
“Our banks are here to help,” he said.
“Anyone experiencing financial difficulty should contact their bank to discuss their options. The sooner you talk to your bank, the more likely they’ll be able to help.
“Options could include lengthening the term of your loan, to reduce the amount of regular repayments. In some cases, temporarily moving to interest-only repayments may also be an option.”
Many borrowers ahead on their mortgages
Mr Beaumont noted that many homeowners were well placed to handle higher interest rates, due to a combination of responsible lending and responsible borrowing.
When banks assess home loan applications, they assess people’s ability to repay the loan not at the current interest rate but at a higher rate.
“So typically, there’s a buffer already built in for borrowers,” he said.
At the same time, many borrowers have been paying off their mortgage ahead of schedule.
“In June nearly 46% of people with a home loan were ahead on repayments. As interest rates declined over recent years to historic lows, these borrowers likely retained their repayments at the same level, or increased them, to help repay their loans faster, which shows a good level of financial capability,” he said.
If you’re facing any financial changes, please contact me for a confidential chat. I can discuss your options with you and negotiate on your behalf with your bank.