More New Zealanders are seeking the help of financial mentors and budgeting services as cost of living pressures get on top of them. Photo / 123rf
More New Zealanders are seeking the help of financial mentors and budgeting services as cost of living pressures get on top of them. Photo / 123rf
Financial mentors and budgeting services around the country are seeing a noticeable increase in New Zealanders seeking financial shelter from the cost-of-living storm.
“It’s a bit like water torture,” said David Verry,financial mentor at Auckland Central Budgeting Consultants, of cost increases.
“You just have little drips on any items… at the end of the day they all add up.”
Verry told the Herald the organisation traditionally sees an uptick in its services around this time of the year, but the cost-of-living increases had exacerbated the situation.
“People are clearly just getting behind on things... particularly mortgages,” he said.
Away from New Zealand’s biggest and most expensive city, things aren’t any easier.
“What we’re starting to notice here in Dunedin is more people struggling who aren’t on the lower income brackets,” said Andrew Henderson, manager at Dunedin Budget Advisory Service.
It was people in professional services such as dentists, trades, builders, plumbers and teachers, Henderson said.
“The whole lot,” he said.
“It’s just slowly crept up but it’s quite noticeable now.”
Henderson said the team of four, of which only two are full-time, are seeing about 10-15 people or families per week seeking their help.
“About 70 per cent are new people and 30 per cent have had some dealings with us before,” he said.
“It’s often middle-aged couples coming in for help, couple of young kids, own their own home, probably both work, reasonable income but outgoings are exceeding their income.
“There are also a lot of families [who] have cars on finance, possibly two cars on finance.”
Verry said he knew of some services that were telling clients they would have to wait for two to three weeks to be seen.
“There are a lot of pressures on the budget services to assist the clients where we can,” he said.
“There are a lot of people in that middle-income bracket that are struggling. They’re not receiving any form of benefit assistance, they’re doing it tough, they haven’t got increases in their wages but, clearly, their cost of living is going up.”
Shirley McCombe, general manager of Bay Financial Mentors (Tauranga), said it was seeing more clients than before.
“Even families with dual incomes are struggling,” she said.
“When I started five years ago, we saw about 3500 people per annum. This year we will see approximately 5500 people.”
At Budgeting Services North Canterbury, service manager Sharon Grant said staff were meeting face-to-face with approximately 33 people/families per week, up from 21 last year.
“We had 22 new clients in the first week of January 2024. We have never had that many clients, in one week, at the beginning of the year.
“There are so many challenges New Zealanders are facing, and we only see a fraction of them.”
Mortgage pain strikes
Verry said in the past they didn’t typically see people with mortgage struggles coming to budget services.
“That’s basically now a standard category of client that will now be coming in to see us just because of the increase they have had with the interest rates,” he said.
A lot of the trouble was around the refixing of mortgages, Verry said.
“We’re now kind of into that second round of the resetting of the mortgages… people 12 months ago that came off a 2.5 per cent might have gone onto a 5 per cent, they’re now on a 7 per cent,” he said.
“The other thing that goes almost hand in hand with that… we’ve noticed quite a number of clients who are struggling with their mortgages have stopped paying their insurance.
“They’re saying, ‘well our mortgage is slightly more important than the insurance that we’re paying for our house’.
“Obviously that’s in breach of the loan agreement,” Verry said.
“It’s just coming back to that lack of cash.”
Mortgage arrears are at their highest level since March 2020. Photo / 123rf
The number of New Zealanders behind on their mortgage repayments rose to more than 21,800 in January, up 16 per cent year-on-year, according to the latest figures from credit bureau Centrix.
The proportion of mortgages now outstanding is 1.49 per cent – the highest level seen since March 2020.
Verry said demand for hardship applications for KiwiSaver had ramped up, with a lot of that to do with mortgage arrears.
Figures from Inland Revenue show $19.7 million of KiwiSaver funds were withdrawn due to financial hardship in January 2024, up from $9.4m in January 2023.
Putting basic essentials on the credit card
Both arrears and demand for credit are on the rise as desperate people look for ways to pay for essential items.
“It’s horrible to see the usage of credit cards continuing to go up… what we are sometimes seeing is a lot of the basic or essential items are being put on credit cards,” Verry said.
“When you start seeing things like food going onto credit cards… we’re now seeing that come through even more strongly than history would also say.
“Buy now, pay later continues to be a bugbear for us.”
According to Centrix, demand for buy now, pay later products in January had increased 14.1 per cent year-on-year.
But missed repayments for such schemes had risen to 9 per cent of active accounts.
Meanwhile, consumer arrears rose to a seven-year high in January, with 13.1 per cent of accounts behind on repayments. There are now 480,000 consumers behind on payments, up from 439,000 in December.
“People are used to living in the way they are accustomed,” Henderson said. “Often for the clients we see [they are] reliant on quite a bit of credit and hence we’re starting to see the arrears.
“In our opinion, it only really adds to the problem. It’s just pushing the problem away, it’s not dealing with it.”
In North Canterbury, Grant said they were also seeing families use buy now, pay later schemes for the essentials.
“Parents are feeling the pressure to simply provide the basics for their children.
“Food costs have spiralled, and everyone is feeling the pinch. Some clients will forgo food to pay their rent and power bills.”
Those needing help can reach out to MoneyTalks, a free budgeting and debt service. MoneyTalks can also put you in touch with a local mentor.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.
