KEY POINTS:
Homeowners are more confident about meeting repayments this year despite a big interest rate rise facing those soon to re-fix mortgages, a survey says.
The Genworth Financial Mortgage Trends Report found 77 per cent of people expected to easily meet repayments in all or some months this year,
up 2 per cent on last year.
Peter Hall, country executive and director for Genworth Financial Australia and New Zealand, said one-third of people whose fixed rate expired in the next year were paying less than 7 per cent, while most home lenders were offering standard variable rates of between 10 per cent and 10.55 per cent.
"A jump of 3 percentage points in a mortgage rate can be more than enough to tip a borrower into arrears and possibly default, and this should be a serious consideration for the home lending market," Hall said.
The survey, which interviewed more than 1000 people at the end of last year, found that 78 per cent of people had a fixed rate mortgage, of which 28 per cent would expire during the next year.
Raewyn Fox, chief executive of the Federation of Family Budgeting Services, said between 10 per cent and 20 per cent of people seeking advice had mortgages.
"We are seeing people that are saying, 'the interest rate's about to go up on our mortgage and we just don't have the money to pay it'," Fox said.
The number of people concerned about mortgage payments had increased and the cost of many other essentials had also risen, including petrol, power, bread and milk, Fox said.
"It's not just the mortgage that's pushing them over the edge, it's all those essentials going up at the same time combined that causes the crisis."
Meanwhile, landlords were telling tenants that rising interest rates would also lead to rent increases, she said. The best advice for people concerned about meeting repayments was to seek advice earlier rather than later.
"If they come in early in the piece and have some disposable income to work with, there's heaps we can do for people."
The federation was a free service with about 130 affiliated services nationwide.
"Sadly most people don't actually come to see us till the last minute when actually there's very little we can do to help."
The Genworth Financial survey found the most likely reason to cause repayment difficulties was a change in personal circumstances, including divorce, pregnancy or a change of job.
However, the survey showed that despite the re-fixing of mortgages due in 2008, people felt comfortable about meeting their new obligations, Hall said.
"The main thing we can glean from that is that whilst the interest rates have gone up in that period of time, you still have very strong employment in New Zealand."
Banks had provided 80 per cent of property owners with their most recent mortgage, with 25 per cent of people using a broker. Real Estate Institute data showed the median house price had doubled between July 1998 and July 2007 rising from $165,000 to $345,000, Genworth Financial said.
New Zealand could introduce mortgage products available in other countries in response to the issue of affordability, Hall said.
Potential mortgage products included amortisation to reduce monthly payments and extend the loan period up to 40 years, shared equity mortgages whereby the increase in property value is shared with an equity provider and products with a higher loan to value ratio.
Mortgage survey
* 77 per cent expect to easily meet payments in 2008.
* 78 per cent have a fixed rate mortgage.
* 28 per cent of fixed rates set to expire in the next year.
* Cash rate has risen from 5.25 per cent to 8.25 per cent in three years.
