Kiwis in 'real state of flux' ahead of OCR announcement - mortgage advisor

The Reserve Bank will announce at 2pm whether the (OCR) will be lifted or stay the same.
The Reserve Bank will announce at 2pm whether the (OCR) will be lifted or stay the same. Photo credit: Getty Images


Mortgage holders continue to watch interest rates with trepidation, as cost of living pressures further squeeze them.

The Reserve Bank will announce at 2pm this afternoon whether the official cash rate (OCR) will be lifted or stay the same.

It has been a fraught time for mortgage holders, and Loan Market director Bruce Patten said that anxiety had only been further heightened by the fact economists could not agree on whether the market had reached its peak or not.

Westpac recently predicted the rate would remain at 5.5 percent, while ANZ recently pencilled in a 25 basis-point rate hike this week, with a possible follow-up hike in April. A Reuters poll of 28 economists last week showed all but one expected the central bank to hold the OCR at 5.5 percent.

"People are in a real state of flux, where they don't know when the rate is going to come down," said Patten.

One homeowner, who had refixed again after coming off a significantly lower mortgage rate last year, opted to refix ahead of the OCR announcement, and glad the jump was not any bigger.

But with rates continuing to rise, as well food, petrol and insurance, he said he was having to be more frugal, or go without some things.

"Every dollar counts."

He was hoping that inflation would soon come down.

But it was not just mortgage rates. Council rates and insurance costs were putting further pressure on already stressed and squeezed home owners.

David Verry - a financial mentor at North Harbour Budgeting and Auckland Central budgeting - said many first-home buyers in particular would have stretched themselves to get into a home, and were now seeing a significant hike in costs.

Verry said he and other financial mentors were aware of some people debiting their mortgage payments to their overdraft or lapsing on their insurance payments due to rising costs.

Centrix's January Credit Indicator Report reported a four-year high in mortgage arrears, with more than 20,000 mortgage accounts past due in December.

Verry said the number of people reported to be falling into arrears were still low, but the numbers did not factor in those whose mortgage payments were going straight to overdraft.

With those deficits not reported on the mortgage statistics, he said he had "this suspicion that the mortgage arrears are potentially being underreported".

He said it was also problematic if people were lapsing on their house insurance as that was a requirement of their loan agreement.

Verry said financial mentors were also seeing mortgage holders needing their help in levels not seen before.

"It's not unusual for us to see people with mortgages as clients now, whereas two years ago that was that was not usual."

Patten said his clients were also reporting that higher mortgage rates and more expensive costs of living were adding stress when it came to paying the mortgage.

"We probably have had the most requests for people to move on to interest-only [loans] for affordability than we've seen since probably back in 2008 with the GFC.

"For people at the moment, it's about trying to survive until we do start to see some rate cuts."

Patten expected those cuts would come later this year as unemployment rose.

"I think that will be the catalyst that brings the Reserve Bank to the realization that they're going to have to drop interest rates and sooner rather than later."