ANZ New Zealand announced that it will increase its mortgage serviceability interest rate above 8%, which will dramatically impact a large share of fixed term borrowers that are still paying mortgage rates of 2% to 3%:Speaking to interest.co.nz after ANZ NZ posted record annual profit of almost $2.3 billion, CEO Antonia Watson said 57% of the bank’s home loan book is still paying interest rates beginning with a two or three. This means that New Zealanders that originated mortgages at rock-bottom pandemic rates have yet to impacted by the RBNZ’s monetary tightening, which is among the most aggressive in the world:The RBNZ’s rate hikes have lifted one and two year fixed mortgage rates to more than double their pandemic lows, with further rises likely:According to Westpac, “around 24% of mortgages will come up for re-pricing by the end of this year, and a further 23% by mid-2023”. Most of those borrowers “will face refixing at substantially higher interest… that’s 2 to 3 percentage points above what it was” when first originated:That is when the impact of the RBNZ’s aggressive monetary tightening will hit hardest. Household consumption will shrink and the New Zealand economy could be thrown into a sharp recession. House prices, which have already fallen nearly 13%, will also very likely experience peak-to-trough losses of more than 20%.

Source: Stuff October 28, 2022 08:14 UTC