Raewyn Cox, Federation of Family Budgeting chief executive, was shocked to find our rates were towards the OECD top.
Many people were struggling with mortgages, partly due to high prices but also because of poor planning. They had not factored life changes - like a double-income reducing to single-income - into repayments, she said.
"Overcommitment is a big issue. We don't see a lot of mortgagee sales because people have become a lot more aware in the last few years."
High prices and high interest rates sentenced a rising number of New Zealanders to be lifetime tenants.
"A lot of people have given up hope and are stuck in expensive rental situations, heading towards retirement," she said.
Shaun Drylie, ASB product and strategy general manager, said those rates reflected the health of our economy and world interest rates were low because governments had to cut interest rates to stimulate economies.
"Compared to where we have been, it's now not as hard for New Zealanders to pay mortgages. We have very few mortgagee sales and there's less in Auckland as an average rule because prices are moving up so people in a distressed situation are able to sell their properties a lot easier."
William Cairns and James Lockie of Ellerslie-headquartered General Finance said our rates were particularly high on the global stage but at least they weren't going up soon.
"The consensus among financial market commentators is that there are unlikely to be any more rate increases this year and the next increase may be as late as June 2015." They also pointed out how much easier it was for the British.
"New Zealand is often accused of having high mortgage costs in relation to borrowers' incomes. For example, for a couple on an income of $100,000, borrowing $500,000 for 25 years at a 6.75 per cent floating rate, this will represent 41 per cent of their income. If the borrowers were based in the UK, where on average rates are 2 per cent lower, the debt servicing is a more respectable 34 per cent. It seems a pity that first-home buyers are penalised with higher mortgage rates and lending restrictions just because we have one of the better performing economies."
But Nick Kotze, a registered financial adviser of LoanMarket, said people should consider the flip side of the high interest rates.
"In economies where the interest rates are higher, you will also find that capital appreciation tends to be higher. Therefore the people who are paying the high interest rates are also bearing the fruit of their property appreciating more than in most of the OECD."
NZ v overseas
Long-term interest rates
Iceland6.59%
Mexico5.65%
New Zealand4.2%
Australia3.41%
United Kingdom2.42%
United States2.42%
France1.41%
Netherlands1.2%
Japan0.49%
- Source: OECD
10 point mortgage checklist
Applying for a mortgage or negotiating new terms? Here's a handy checklist on how to get the best deal from your bank
1. Shop around
Some people don't realise it is possible to negotiate a home loan. Your bargaining points include how much deposit you have and how much other business you do with the bank.
2. Fixed or floating
Ask your banker to outline the pros and cons, particularly in terms of charges and interest rates. Or examine a split option and the benefits or downsides of each. For example, with a fixed-rate mortgage you know how much you'll be paying in each instalment, protected from interest rate increases during the fixed-rate term. The downside is it's less flexible for one-off payments.
3. Break fees
Do your homework and think carefully before committing to a fixed mortgage because altering or getting out of it could cost a lot.
4. KiwiSaver
Can be used to help you buy your first house. Explore whether the KiwiSaver subsidy and withdrawals are options for you.
5. Loan to value ratios are limits on bank lending
How does this affect your buying of a house? The restrictions mean that only 10 per cent of the bank's new lending for residential housing (new home loans) can have a 20 per cent deposit or less. If you are looking to buy a home and have a deposit that is less than 20 per cent of the home's value, you may find it harder to get a home loan.
6. Mortgage broker
If you're struggling to get a loan, you might want to consider this skilled, specialist sector.
7. Repayments
Work out your plan and ensure you'll be able to live on the amount left over after paying the mortgage.
8. Insurance
Factor into your budget the cost of home and contents insurance and you may be required to take out life and income insurance.
9. Go longer term
Set your initial home loan term at a longer term (say 25 years) and then increase your repayments by as much as you can comfortably afford. You can always reduce your repayments if things get tight. Any repayment increase will add significant benefits over the long term.
10. Look back in joy
If you took out a mortgage a few decades ago, you can probably see the benefits today.
