Mortgage stress: One in eight Auckland homes on market were bought during boom, may sell for loss

New data shows one in every eight Auckland homes going on sale is at risk of selling for a loss or minimal profit.

It comes as a property insider said he is also seeing increasing numbers of homeowners struggle to afford to pay their mortgages.

The data from property website OneRoof shows 13 per cent of almost 11,000 Auckland homes listed for sale in recent months were purchased during the market’s boom period from September 2020 to January 2022.

Prices skyrocketed to a record high of $1.58 million in that period but have since fallen about 19 per cent to about $1.3m, while interest rates have jumped sharply.

This risk of more homes selling for a loss coincides with Loan Market mortgage adviser Bruce Patten seeing a “a big uptick” in people losing jobs and requesting help to lower their monthly payments.

“We’re doing a lot of requests to the banks to switch people to interest-only terms so they can try to make ends meet until the interest rates start dropping,” he said.

“Every week I would be doing probably on average two or three requests to switch, which in normal times we don’t do any.”

One couple Patten recently helped secure an interest-only loan told the Herald life can unexpectedly be flipped on its head in an instant.

Both lost their longtime jobs in the past two years, with the woman being made redundant, while two failed surgeries left the man unable to use his hands.

The couple, who did not wish to be identified, had been barely hanging on financially since interest rates climbed.

Patten and other property pundits warn unemployment remains one of the most important indicators to watch for signs that mortgagee sales could rise.

That’s because those losing jobs are typically most likely to be forced into selling their homes when they don’t want to, he said.

National unemployment remains at historically low levels but is on the increase, with the latest data for the March quarter described as “gloomier than expected” and coming amid reporting of widespread private and public sector job cuts.

Similarly, credit company Centrix reported the number of people behind in their mortgage payments had jumped to 21,800 in January.

This was up 16 per cent on the same time last year but was still low by historical levels.

Patten also said homes being put on sale so quickly after they were bought was not a direct sign of mortgage stress.

There could be many reasons why recently bought homes were back on sale, including changing circumstances, such as owners looking to change cities or move in with a new partner.

He also said many homeowners have so far been able to absorb the increase in interest rates.

That’s because he estimates about 40 per cent of owners take advantage of periods when interest rates are low to make higher mortgage payments than required in a bid to pay off their loan faster.

That means they’re better placed to absorb increased fees when rates go up.

OneRoof editor Owen Vaughan said not every home bought during the boom has sold for a loss.

“A Remuera mansion bought in 2021 for $11m resold in March this year for $12.8m. Some sellers are clearly still seeing on-paper profits in this market,” he said.

From dream retirement to nightmare

Life can be flipped in an instant.

That’s the feelings of the couple interviewed by the Herald who recently renegotiated with their bank to pay interest only on their loan.

Their life had been on track when they bought their “retirement” home north of Auckland in 2019 after selling their former Manukau house.

Working as a truck driver and executive assistant, the couple – who didn’t wish to be named – had previously found their loan payments comfortable.

However, terrible back pain forced the man to go in for major spinal surgery in August 2022.

The bones in his spine had “disintegrated” and turned to “mush”, possibly as a result of years spent in his former job as a mechanic, his wife told the Herald.

However, the surgery to put supporting rods along his spine didn’t go well. He woke up unable to use his left hand, with the fingers curled up and immobile.

It left him off work for 16 weeks, most of it with no income.

Despite his left hand failing to recover, he managed to eventually get back to work. But one day while trying to attach a trailer, his hand slipped and he fell onto the concrete and knocked himself out.

The accident convinced the couple to try another surgery in June 2023 to try to fix his left hand.

But not only did the surgery fail to recover any movement in his left hand, it led to him also losing movement in his right hand.

Now he only has use of the thumb and forefinger in his right hand.

Unable to work, ACC is providing compensation but at a reduced income.

Adding to the turmoil, his wife lost her job as an executive assistant – a position she had held for years – in December 2022, just months after her husband’s first surgery.

She has since secured three short-term contracts, but it’s resulted in a $17,000 cut to her salary and loss of a “really good package” that included medical insurance and profit share.

During this time, interest rates have also been on the rise.

Just after the first surgery, the couple came off a 2.95 per cent fixed interest rate and decided to fix on a new one-year term at 4.5 per cent.

Then they fixed again last November at 6.95 per cent.

It’s led their monthly payments to jump from about $2500 two years ago, to $3500 last year and now $4000.

By securing an interest-only agreement with the bank, they have managed to reduce their current payments back to $3500.

But it’s a small reprieve.

The past two years have exhausted the couple’s savings.

They do have nearly $300,000 in their Kiwisaver but were only allowed to pull out $4000 – just one month’s mortgage payment.

The couple advised others struggling to talk to their bank or broker as soon as possible.

The process to change to interest-only is slow and can involve a lot of back-and-forth with the bank.

“You’ve got to prove you have no savings, you’ve got to present three months’ worth of bank statements and expenditure, your rates bill, credit cards and more,” the wife said.