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Hundreds of thousands of homeowners - many already close to breaking-point - are bracing for more pain with predictions of further interest rate rises to stem the surge in the high-flying New Zealand dollar.
Analysts are widely tipping Reserve Bank Governor Alan Bollard will push up interest rates this week - a move that's expected to deliver more heartache to homeowners in the coming months.
Floating mortgage rates are now around 10.3 per cent and, if Bollard raises interest rates this week and again in two months time, they are likely to rise at least another half a per cent.
Two-year fixed rates would also rise, but possibly only to around 9.5 per cent.
Compare this with four years ago, when five-year fixed rates were hovering around the 6 per cent mark. For those homeowners who secured low rates two years ago during a mortgage price war between the banks, the next few months could be make or break time as their mortgages come up for renewal.
Commentators say already there is evidence mortgagee sales are increasing as a result of rising mortgage rates.
Kim Lyons of First Rate Mortgages predicted that in the next three to six months some homeowners could be pushed to the brink as interest rate rises started to bite.
Last week, Lyons' firm launched a new service involving a three-monthly debt check on clients in tight financial situations, to help protect them from the threat of a mortgagee sale.
"That's a reflection of the times we're in," he said.
People often missed a mortgage repayment rather than a car loan repayment in a tight month, because cars were immediately repossessed after missed payments, while home lenders generally gave borrowers three months to catch up, he said.
One homeowner already feeling the pinch is 32-year-old Sheryl Maafu, who bought her three-bedroom home in Kaitaia three years ago.
Already, she has had to take on boarders and sell some of her belongings so she can continue to meet her mortgage repayments. She is now on 7.75 per cent, but her two-year fixed rate will end soon.
Maafu's weekly $290 mortgage payments suck up almost half of her income and, if interest rates rise again, she fears she could be driven to a mortgagee sale.
Kingsland homeowner Simon Little is not in such a precarious position as Maafu, but admits he's starting to feel the impact of high interest rates as they filter down through other parts of the economy.
"When we bought our place, the interest rates were about 6.89 per cent, but the land and the house prices were quite affordable, which they're not now. Interest rates now are 8 or 9 if you're fixed, and 10 if you're floating.
"For the young people trying to come into the market and trying to buy a house, they are basically priced out of the market now. When we bought it was like $300,000 or $400,000, now you're looking at $600,000 or $700,000."
Little says his mortgage won't be coming up for renewal for more than two years. He fixed for three years at the start of this year, after "seeing the changing landscape" and approaching his bank.
He is paying 7.6 per cent. "It's still quite affordable."
But he said it was more than that: "If you're doing up your house the interest rate rises have a huge impact on the builders and everyone. They have to [borrow] from the bank and they get whacked. All these costs get passed on to us ... "
Wayne Besant, managing director of ANZ Retail Banking, said the best advice for homeowners struggling to cope with wave after wave of interest rate rises was to talk to their bank or mortgage broker to see what options were available.
He said how homeowners structured their home loan could have a significant impact on the total cost of the loan. Longer-term fixed rates could often be more expensive, especially in the present interest rate climate, so one option was to consider splitting their loan into two or three different fixed terms so that the whole loan was not maturing at the same time.
Besant said if your cashflow allowed it, you could structure your home loan so you could make lump-sum payments without incurring additional fees. This could involve putting a small portion of your home loan on a floating rate, which was a good way of chipping away at the principal.
