First home buyers facing increased mortgage rates at the same time inflation is taking its toll are concerned they won't be able to keep their homes, but experts are warning Kiwis not to panic.
The Reserve Bank data shows the average one-year mortgage rate was at 5.56 percent in June 2022, something many first homebuyers who bought at the top of the market aren't used to.
But with warnings of the rate to increase, an expert has said the interest rates are not the root cause of Kiwis' finical problems.
While nobody likes to pay higher prices and seeing more money slip out of your account each fortnight is not a great feeling, in the grand scheme of things the steady climb in interest rates is not much higher than pre-pandemic levels.
According to data from the Reserve Bank, interest rates have recovered from plummeting down to about 3 percent in 2021.
Infometrics principal economist Brad Olsen told Newshub that while mortgage rates have come back down in the past couple of weeks, the long-term trend at the moment is for interest rates to continue to shift upwards.
"Yesterday's labour market's numbers, particularly the wage growth figures, do suggest the Reserve Bank is going to have to continue to increase the Official Cash Rate which will increase mortgage rates as well," Olsen said.
"[There's] no real hope in sight on the horizon interest rates will get considerably cheaper for first home buyers anytime soon, unfortunately."
The gloomy outlook has many stressed, with a New Zealand Reddit forum filled with Kiwis saying they are concerned about meeting their mortgage payments.
"Rising interest rates, rising rates, rising insurance, rising everything. We get paid OK but it feels like such an uphill battle to get anywhere," one wrote.
"It feels like we worked so hard to get here but we have to work even harder to stay here, and selling our house might result in negative equity so we're so torn over what to do."
However, one expert said mortgage rates aren't the culprit behind Kiwis feeling the pinch.
Tony Mounce Mortgages managing director Tony Mounce said other factors are behind the pressures first-home buyers are feeling.
"Interest rates are still beautiful, 5 percent is still a thing of beauty," Mounce said.
Mounce said there is probably another trigger for homeowners feeling the pinch including the combination of the high cost of living and inflation.
Annual inflation increased to 7.3 percent in the June 2022 quarter, the largest jump in over three decades.
But despite increasing costs of living, experts say Kiwis are not jumping off the property ladder just yet - nor should they.
"I think a lot of people are still going to want to try and hold onto their house at the moment," Olsen said.
Looking ahead, he said it is still going to be expensive to get into the property market and even with house prices pulling back a bit, the rapid boom in interest rates means anyone wanting to buy in the future still faces a high threshold to get there.
Ways to 'take out the hurt'
Olsen said first-home buyers may need to make significant adjustments to their current spending to figure out how to make sure they can pay their mortgage going forward.
"There are going to be some hard challenges for those first home buyers over what they might have to give up."
He said costs such as travel and shopping may be limited for them.
Kiwis online have shared how they have rented out their spare room or looked into getting an international student border to earn some extra money.
Mounce said there are ways of "taking out the hurt" for people struggling to meet their mortgage payments.
He said an interest-only home loan is an option, which is a temporary loan structure where the borrower only pays the interest on the loan.
For example, he said a $500,000 standard 30-year loan at a 5 percent mortgage rate's weekly payment is about $620.
But, without interest, it would be $480. This means the borrower could spend about $140 less a week until they get back on their feet.
"It solves a cash flow issue while it's there and at least they're not going backwards," Mounce said. "They are not going forward, but they're not going backwards."
Any concerned homeowners should always talk to an advisor before it becomes a problem, Mounce said.
