Financial ‘discomfort’ among people with mortgages spikes

Sunday, 18 August 2024

More than half of people are exhibiting some symptoms of stress over their money lives, a survey from the Retirement Commission Te Ara Ahunga Ora shows.

There’s been a big jump in people with mortgages describing themselves to the Retirement Commission Te Ara Ahunga Ora as “just treading water”, “sinking a bit”, and “sinking badly”.

In June 2022, 43% of people with mortgages said their finances corresponded to one of those three statements.

In June this year, having a mortgage was a proxy for struggling, with the proportion of indebted homeowners feeling the pinch having risen to 56%.

To mark its annual Money Month focus on personal finances, the commission surveyed the public to find out how people were faring in their money lives.

They found the biggest deterioration among people with mortgages, though the proportion of that group feeling financial discomfort remained lower than renters; 67% of whom said they were caught in one of the “just treading water”, “sinking a bit”, and “sinking badly” groups, up from 65% in June 2022.

Across the entire population of homeowners and renters, higher earners and lower earners, 56% of people described their financial position as uncomfortable.

Governor Adrian Orr says inflation appears to be coming under control, allowing for an OCR cut.

Tom Hartmann, Sorted personal finance lead at the Retirement Commission, said: “We have half the country saying, ‘We are uncomfortable about our financial situation’, and it’s grinding at people.”

Gloomy as things were right now for many households, Hartmann said it would be surprising if things had not improved for many households by this time next year.

Bank mortgage rates have begun to come down, and the Reserve Bank Te Pūtea Matua has finally cut the Official Cash Rate leading economists, and bank bosses to predict the pressure on household finances will start to ease.

After revealing a 7% drop in the bank’s profits on Wednesday, ASB chief executive Vittoria Shortt said: “We believe fixed term home loan rates have now peaked, which is positive, however we are conscious most of our home loan customers are now on interest rates above 6%.”

She said most homeowners were coping with high repayment rates, but acknowledged that many had had to cut spending on other things to keep on top of their home loan repayments.

Nationally, just under 6100 people with home loans were on “financial hardship” terms with their lenders, who had allowed them some form of repayment easing, such as allowing them to temporarily make reduced repayments, data from credit reporting company Centrix showed.

Hartmann said there was a proven link between financial discomfort and personal wellbeing.

The commission’s survey showed financial anxiety was high with a majority of people showing some signs of “stress”.

Tom Hartmann from the Retirement Commission says financial stress is reducing people’s wellbeing.

In all, 63% reported money stress indicators like having trouble sleeping for thinking about money.

The highest levels of money stress were among the young, people aged 18 to 34, the commission found. Younger people were especially worried about their debt levels.

Young people have borne the brunt of rising unemployment, government data shows.

“A lot of the difficulties comes because of [a lack of] employment opportunities, and just a lack of income,” Hartmann said.

However, the commission’s research contained some silver linings to the findings, that could stand the country in good stead when the economy starts to recover.

It identified an increase in people budgeting, and an increase in people talking to friends and family about money, and it also identified an increased self-reported tendency for people to save before making big purchases, rather than going into debt to make them.