Kiwis have saved $425 million with one bank simply by rounding up their everyday transactions into a savings account.
However, banks told NZME they are aware some customers are struggling to make ends meet with the soaring cost of living. All had expert help available and urged those in financial strife to contact them sooner rather than later.
The Reserve Bank May 2023 Financial Stability Report reveals that, for a household with a mortgage, the share of disposable income required to service the interest component of their mortgage debt would more than double from its recent low of 9 per cent to about 22 per cent by the end of this year.
Data from credit bureau Centrix also shows that, in April, 19,000 mortgage accounts were past their due dates.
According to its Credit Insights Report, 10,700 accounts were also in financial hardship, up 21 per cent since the beginning of the year.
The Reserve Bank lifted the official cash rate to 5.5 per cent last Wednesday. One to two-year fixed mortgage rates are now typically between 6.5 and 7.5 per cent, with some banks offering rates slightly lower or higher.
However, an ASB spokeswoman said New Zealanders had saved more than $425m by rounding up their transactions to the nearest $1, $2, $5 or $10.
Save the Change was introduced in 2010 to help customers build their savings with the extra amount being automatically deposited into a savings account. About 180,000 ASB customers are currently using Save the Change.
“We have an important role to play in connecting customers with the right tools and services to help them navigate their personal finance needs.”
She said that included financial well-being workshops, apps such as Goal Planner and Card Tracker, Support Finder, and level-up podcasts aimed at helping younger New Zealanders build financial capability and learn good money habits.
If people were struggling with mortgage payments they were advised to first contact their bank.
Sarah Ireland said she loved Save the Change because it was automatically done behind the scenes.
“I don’t have to do anything and it’s small amounts. If I was trying to save I wouldn’t transfer small amounts here and there, it would sit in my everyday account and I would just spend it.”
Ireland started rounding to the nearest $2, then $5 then $10. So far she has saved $7277.05 in the past three years.
In March, she saved $309.24, in April it was $276.08 and last month she saved $420.68.
“There is no obligation. You can change the round-up amount or fully put a stop to it. I don’t have anything exciting I spend it on, it’s just savings for an emergency which I have had to use a few times with vet bills.”
Jenni Clarkson was another fan and estimated she had saved thousands over the years.
“The uses have varied from saving for something special to saving for bills. At the moment we have a holiday account and two for bills that change goes into.”
Westpac NZ general manager of consumer banking and wealth Mike Norfolk said that, in March, late payments on its 90-day-plus mortgage were at 0.29 per cent, a slight rise from 0.22 per cent in September last year.
“We encourage any customers worried about their financial situation to talk to us early so we can discuss their options. A variety of solutions are available that may prevent a customer from getting into difficulty.”
Links provided to its website said that, if a repayment wasn’t successfully made within 14 days of the repayment date, the rate of interest the customer would pay on any over-limit amount would be the interest rate plus a 5 per cent annual default margin.
However, Westpac would try to process the repayment for the next six days “which gives you a chance to put things right”.
A customer’s credit status may be affected when they start missing payments and they may be required to pay all outstanding monies in full.
“We may also enforce the mortgage and/or any other security you have against the property, which means selling your property and/or any relevant security.”
An ANZ spokeswoman said it was closely monitoring how its customers were managing as people came to refix their home loans.
“We’re contacting them to make sure they’re aware of the options to manage repayments and offer reassurance and support for those who need it.”
About 35 per cent of ANZ customers currently had home loan rates lower than 4 per cent, with about 40 per cent of those not rolling off lower rates until 2024 and beyond, providing additional time to prepare for higher rates.
“Last year we set up a team to closely monitor customers for signs they might be concerned about managing their finances or coming under financial pressure as interest rates rise and the economy slows.”
It also bolstered the bank’s customer financial well-being team and provided training and extra resources to its frontline staff.
“We have well-established processes to support people who find themselves in financial hardship but we’ve become much more focussed on understanding the areas where pressure comes on before they get to this point so we can proactively reach out and offer reassurance and support to those who need it.”
Kiwibank home lending general manager Nicole Pervan said mortgage defaults had increased marginally but were still below pre-Covid levels.
The bank was seeing a minor increase in people requesting to move to interest-only payments.
“It is about 1 per cent of our total home lending book. So far, we have seen most households able to adjust payments to meet the new repayment rates and still stay on track to repay their loans as scheduled. But we are getting more feedback indicating how challenging that will be given other cost increases they are facing currently.”
Kiwibank was also proactively contacting its customers to ensure they are aware of the financial options available.
BNZ consumer lending and insurance partners general manager Martin Elliott said the quality of its home loan book was good, with less than half of 1 per cent in 90-day arrears.
“When interest rates went down, many customers didn’t reduce their mortgage repayments, instead choosing to pay down their loans at a faster rate. Now that interest rates are coming back up, those customers have built in a buffer that is helping them to manage their mortgage payments.
“So they’re not seeing the same impact on their discretionary spending as they otherwise would have.”
He said customers calling due to financial hardship had a range of support options available, including mortgage deferrals, changing their repayments, or accessing their KiwiSaver funds under the hardship provisions.
Other tools it had were TotalMoney to pay off the mortgage faster, MyProperty and RapidSave.
- Overestimating your ability to manage money. How much savings do you have right now? What is your weekly/monthly budget for non-essential items? If anything were to happen to you tomorrow, will your household be able to manage financially? Until these questions are answered, people have no idea how healthy their finances are.
- Not keeping track of your money. Keeping track for a few weeks can provide a lot of insight into your spending habits.
- Justifying wants as needs means spending a lot of money on frivolous things.
- Making big money decisions without any research. If you’re going to make a decision such as a new investment, ask questions and seek answers. This also applies to new items.
- Ignoring the true cost of borrowing. Be mindful of extra costs such as set-up fees, administration charges, insurance, late payment fees if it is not paid off within agreed timeframes, and interest rates when the interest-free period ends. - Source: Westpac