Finance Minister Grant Robertson urges people to talk to banks about mortgage distress

Finance Minister Grant Robertson says people should talk to their banks if they fear mortgage distress, with the Reserve Bank’s financial stability report today warning that a rising number of people face difficulty as interest rates rise.

“There is the potential for some borrowers that they will have mortgage stress in the future. That is the reality of the situation we’ve got with interest rates – I endorse the call for the Reserve Bank for those banks and people to talk to each other,” Robertson said.

“Being in negative equity for a short time when you own a house is not uncommon. A house is an asset you hold for a long period of time.

”Obviously for those people who borrowed in the last couple of years at very low rates, but borrowing very high amounts, as those interest rates rise some pressure falls upon them,” he said.

Robertson said the report also showed “overall the New Zealand economy is stable and is one that is continuing to deliver good quality jobs”.

The Reserve Bank’s report showed around 2 per cent of mortgage lending was in negative equity as of September but that could rise to about 7 per cent if house prices were to fall a further 10 per cent.

If house prices fell a further 30 per cent, about 38 per cent of mortgage lending would be in negative equity.

National’s finance spokeswoman Nicola Willis said the report warned of “mortgage mayhem”.

She said the report’s warnings of rising negative equity and the stress placed on first home buyers were “gravely concerning and portray a bleak future for Kiwi mortgage holders”.

“I worry particularly about recent home buyers whose prospects look particularly grim,” she said.

Willis said it showed the need for “strong, careful economic management and fiscal responsibility”.

The Green Party’s finance spokeswoman Julie Anne Genter said the main takeaway from the report was that “rising interest rates will make it harder for people to pay the bills – all while boosting bank profits”.

“The Government needs to step in and tax excess corporate profit and use the money to provide vital support for struggling families,” she said.

Also released on Wednesday were figures from Stats NZ showing another quarter of near-record unemployment, which was at 3.3 per cent and average hourly earnings increasing by 7.4 per cent.

This meant that hourly earnings increased by more than the rate of inflation that quarter, after a period where consumer price inflation grew faster than wages.

Robertson described this as “a very positive outcome”.

“Unemployment is low, more people than ever are in work and wages are growing faster than inflation to help them meet cost of living pressures.

”This is something worth celebrating and shows our economic plan is working for New Zealanders despite the challenging global environment,” he said.

National leader Christopher Luxon, using the Labor Cost Index, said that people were in fact left poorer by the economy.

Wage inflation, measured by the labor cost index (LCI), was 3.7 per cent in the year ended September 2022, trailing inflation which was 7.2 per cent over the same period.

“It’s no surprise Kiwis are feeling crushed by inflation – prices have now risen faster than wages for nine quarters in a row,” Luxon said.

Act leader David Seymour said the low unemployment rate masked an immigration crisis.

“The country is missing about 140,000 people based on normal migration trends. That’s why there is help wanted signs and businesses grinding to a halt from Cape Reinga to the Bluff,” Seymour said.