Aaron and Jessica Rubin aren’t selling their house yet - but it’s touch and go.
They’re among Kiwi homeowners across the country collectively paying banks $1.3 billion more in interest payments during the first three months of 2023 compared to the same period last year.
For the Rubins, rising rates have led their loan repayments to jump by about $2400 a month in two years, with the couple first telling the Herald on Sunday in January they were on the brink of selling.
They bought their Nelson home for $1.2 million in 2021, taking out a more than $1m loan with one of the big four banks.
Initially, they paid about $4000 a month in home loan repayments. But when their one-year fixed term ended, payments jumped to $5142 a month on a refinanced 3.99 per cent rate.
The bank then offered them a 6.46 per cent loan, meaning their repayments would have hit $6710 in March - a $1600 per month jump.
However, the couple managed to renegotiate a 5.99 per cent two-year term, meaning their monthly payments have instead jumped by $1248.
Aaron said the couple would like to sell.
“We would have sold, and we’d be renting right now,” he said.
“We decided that’s what we want to do, but unfortunately we have some obstacles we need to overcome first, which is going to take time.”
With multiple cost-of-living pressures hitting Kiwis, many pundits expect pressure on homeowners, like the Rubins, to only grow.
Lenders charged Kiwis $3.8b in home loan interest payments during the first quarter of 2023, according to new residential mortgage loan reconciliation figures from the Reserve Bank of New Zealand.
The interest charged is the highest recorded since the Reserve Bank began collecting the data in 2014.
It is well above the $2.5b charged in the first quarter of last year, as well as the $3.5b charged during December’s quarter.
Overall, Kiwis were scheduled to pay $6b (made up of interest and principal repayments) towards their home loans during the first quarter of this year – another record high since 2014.
Data by credit bureau Centrix found 19,300 households are behind on their mortgage repayments, up 26 per cent on the same time last year.
That’s the eighth consecutive month the number of people falling behind on their repayments has grown.
However, Centrix cautioned that the number of households behind on their payments was still low by historic standards.
The Reserve Bank also said it wasn’t yet seeing “widespread distress” among mortgage holders.
Finance Minister Grant Robertson recently told the Herald on Sunday support for homeowners battling high mortgages was not in plans for the upcoming cost-of-living-focused Budget.
But Aaron said he wanted changes to the system – saying that’s why he is willing to share his story and open himself up to criticism from strangers.
“I really want to see what I can do to try to effectuate some change,” he said, noting any change would likely come too late for him.
As well as writing to his local Member of Parliament, Aaron suggested in January that New Zealand lenders could offer 30-year fixed-rate home loans like those that are available in the United States, where he grew up.
Close to 90 per cent of new homes in the US are currently bought using 30-year terms and offer home-buyers stability and the ability to plan ahead, he said.
Aaron also suggested that – while Official Cash Rate rises are designed to force people to consider their finances and cut back on spending – perhaps greater guardrails or support could help prevent vulnerable borrowers facing such dramatic and fast rises.
He also believed early payment penalties – in which lenders charge borrowers a penalty for paying back too much money on their loan early to compensate the bank for lost interest repayment earnings – could be scrapped or made less common, like they are in the US.
“[Early payment penalties mean] the banks continue to pocket money when the interest rates go down,” Aaron said.
“And if they weren’t making record profits then, it would all seem fine, but it’s not.”
Aaron said he and his wife now plan to hold off selling until they complete a subdivision process on their land that was started by the previous owner.
They hope that allows them to better recoup their investment in their home.
But to do that, they will need to invest significantly more money into their property – cash they don’t have right now.
And while Aaron said he should have, with hindsight, locked in a five-year term when interest rates were closer to record lows, that wasn’t the advice given him by his mortgage broker and bank.
“They all said a [one-year fixed term] was the right thing to do,” he said.
“They said, ‘You know, the rates might go up a little bit, but they’ve never skyrocketed’.”
“I’m not from New Zealand, so I was learning on the fly, and with the Fomo [fear of missing out] that had been going on, you had to act quickly in the market at that time.”