Many Kiwis Could Soon Owe More on Their House Than it's Worth
November 4, 2022
The Reserve Bank’s second annual report into financial stability, released this week, says the country financial system is well placed to support the economy. But the news is grimmer for buyers who pulled together huge deposits to buy a home at the height of the market in 2021, when house prices were at record highs and interest rates at record lows.
“Those who took out loans with high loan-to-value ratios during this period are particularly exposed, as much of the equity in their properties is likely to have been eroded,” it noted.
New Zealand has been plagued by a runaway housing market for years, but since November 2021 house prices have dropped by 11%, with declines of 15% in Auckland and 18% in Wellington.
At the same time, interest rates have been creeping up alongside the official cash rate, as the Reserve Bank attempts to curb inflation that hit a 30-year-high in July. The central bank is expected to hike the official cash rate further in mid-November, which could see interest rates rise again.