Homeowners who can't pay their mortgage are more likely to sell before the bank takes their house. Photo / Getty Images
Homeowners who can't pay their mortgage are more likely to sell before the bank takes their house. Photo / Getty Images
Homeowners who can't pay their mortgage are more likely to sell and downsize before the bank takes their house.
Experts say mortgagee sales are still rare despite the impacts of Covid-19.
June 30 data from the NZ Bankers Association shows 61,063 loans worth $21.9 billion were deferred while 88,558 loansworth $27b had been switched to reduced payments.
Figures from the Reserve Bank of New Zealand also reveal 10,065 homeowners were in arrears with their mortgages which were seven days or more overdue in the third week of August.
ANZ has about 18,000 home loans on repayment deferral, which has dropped slightly since loan repayment deferrals due to Covid-related hardship were first offered.
But external communications corporate affairs senior manager Stefan Herrick said some customers, whose circumstances have changed due to Covid-19, might struggle to meet their home loan payments.
However, mortgagee sales were very rare.
"We had only 14 in the year to June and we typically only have a handful each year,'' he said.
''And that's after all options to help the customer have been exhausted. We're more likely to see people choosing to sell the property to downsize their lending or protect their equity.''
The number of customers having difficulty repaying their home loans had also declined.
''In recent weeks we've been checking in with customers to see how they're faring and give support where we can to help customers manage their financial situations.''
There were other options for customers to reduce their repayment amount including extending the loan term or switching to interest-only repayments. These options might have less impact on the loan over the longer term.
Experts say mortgagee sales are still rare but do happen. Photo / Getty Images
The customer contact programme ANZ had been running suggests 5 to 10 per cent of customers were likely to need further assistance at the end of their six-month deferral period.
''Some of these customers may have their deferral extended but we need to adhere to RBNZ guidance which expects lenders to only approve an extension or new loan deferral where there is a need for it and a benefit to the borrower, and when the lender assesses that there is a reasonable prospect of that customer resuming payments when the deferral period ends.''
The Reserve Bank closely monitors financial system indicators to assess for any emerging risks, a spokesman said.
''Our current analysis doesn't suggest that mortgage arrears pose a systemic risk to the wider economy. Banks hold buffers to absorb losses that inevitably occur during an economic crisis. The extension of the regulatory guidance for the mortgage deferrals programme announced earlier this month allows banks more flexibility to help customers in need.
''We recommend any customers currently struggling with their mortgage repayment obligations to contact their bank to discuss the most appropriate options available to them.''
A BNZ spokesman said it had supported more than 25,000 customers with home loan support measures including deferrals and interest-only periods.
''Many customers have resumed regular payments since the first lockdown ended and we continue to talk to our customers to ensure the support measures are working for them.''
Kiwibank spokeswoman Kara Tait said it had not seen a noticeable increase in default numbers since the pandemic struck and the mortgage repayment deferral scheme was put in place.
''This indicates home loan repayment deferrals and other payment arrangements, designed to give customers time to sort out their finances given interruptions to income, are working.''
Some customers whose circumstances have changed due to Covid may struggle to meet their home loan payments, says ANZ. Photo / Getty Images
''We are seeing a very low level of inquiry from new customers for home loan repayment deferrals at present and many customers who opted for short-term support are now contacting us to restore full repayments on their home loan.''
The support packages in place should give most customers time to restore their incomes or to find replacement employment so their loans can be put back onto a reasonable repayment plan.
''Fortunately, interest rates are very low which allows customers and the bank time to work toward an agreed solution.''
A Westpac NZ spokesman said it had not seen a material increase in home loan arrears during the Covid-19 crisis.
It had provided nearly 18,000 customers with repayment relief through deferrals or reduced home loan repayments.
''Of these customers, nearly a quarter no longer require assistance. Mortgagee sales remain at extremely low levels.''
''We always attempt to explore all viable options with home loan customers in financial difficulties to achieve the best outcome for all parties. Only a very small proportion of non-performing loans lead to a mortgagee sale process."
Meanwhile, Rapson Loans and Finance owner Chris Rapson agreed mortgagee sales appeared to be few and far between and the Bay of Plenty had been very lucky.
He assumed families had managed to gather resources to ensure the "destructive process" did not happen.
"Usually people sell the property at about 25 to 30 per cent less than full market value and that comes out of the equity, it doesn't come out of the mortgage."
There was still a likelihood of Covid-19 impacting the number of mortgagee sales, Rapson said.
While tourism and hospitality would be hit hard in the months to come, especially in Rotorua, Rapson said the silver lining was the horticulture industry and the proximity of the port would keep people in jobs.
But if people did find themselves in a financially tight place, his advice was to keep communications open with banks and mortgage brokers.
"Pay your mortgage first, then talk to your broker and keep communication going because we have to preserve the equity at all costs.
