Interesting to see the following quote in the below article:
“Where was the bank's stress test when we took the mortgage out? Is this not irresponsible lending by the bank, akin to the United States sub-prime mortgage lending fiasco?”

The size of these mortgages is just staggering. IMO, lending someone $850,000 to buy residential property is an act of folly.

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https://i.stuff.co.nz/business/prope...sell-the-house

Mortgage rate pain: 'We will probably have to sell the house'
Miriam Bell
05:00, Jul 06 2023

‘Mortgage rates have skyrocketed over the last two years, and that change will cause pain for many people refixing this year.

After Covid hit in 2020, rates fell to record lows of around 2%, but two years on they have climbed to around 7%.

For households coming off low two year rate deals this year, and moving to current higher rates, that means their repayments will cost thousands more.

It will be a huge financial shock to many, so when Stuff reported on the "mortgage bomb" on Tuesday, we asked for reader experiences.

One reader said he and his partner bought their West Auckland home in April 2021 with a fixed rate of 2.65%. They have a $700,000 mortgage on a 20-year term, and were paying $3761 a month.

But they were due to refix, and the best fixed rate currently available was 7.25%, he said. It meant their repayments would leap to $5533 a month.

“That is an increase of $1772 per month, or an extra $21,264 per year. So we will need to find nearly an extra $30,000 worth of income in order to service the increased interest cost.”

They could not extend the term of their mortgage as he was in his early 50s, and the sole income earner for the family.
“So, we will probably have to sell the house as we can't afford this,” he said.

“Where was the bank's stress test when we took the mortgage out? Is this not irresponsible lending by the bank, akin to the United States sub-prime mortgage lending fiasco?”

Another Auckland reader bought a KiwiBuild house in 2019 for $650,000, and refixed their mortgage nearly two years ago for 2.79%.

That fixed-term rate would come to an end in September, and he expected the repayments on their $460,000 mortgage debt would jump significantly when they refixed again.

“What I want to know is why it is not possible to fix mortgages for longer periods of time in New Zealand,” he said
“In the United States, I believe borrowers can fix their mortgage for the life of the loan, why don’t we have that opportunity here?”

The existing situation seemed to favour the banks rather than the public, and hearing about their record profits was a savage burn on top of the rise in costs of living, which were making it harder to get by, he said.

One reader said she and her family had moved to Australia to get better paying jobs, so they could manage their mortgage repayments.

The family put their life savings into buying a house in 2021. They had an $850,000 mortgage, and were on a rate of 3.89%.

When they had to refix to 6.69%, they decided to rent their house out, and cross the ditch, she said.

“The rent is not sufficient to pay for the mortgage, and we have considered selling our house, but due to the drop in the market our house’s value has decreased by $200,000.”

They were struggling to pay rent, child care costs and manage living expenses in Australia, and were hoping for some sort of change, she said.

Another reader originally bought his Auckland house in 2012, but bought his ex-wife out when they separated in 2021.

At the time rent cost about as much as the mortgage, which he got on a 2.59% rate.

But he was about to experience the pain of a massive increase in rates, after he refixed for a special six-month rate of 6.84% this week, he said.

“This increases my mortgage by $811 a fortnight, and I find myself in a predicament. I've already cancelled all my subscriptions, the only other thing I can skimp on is insurance.”

His house’s value had decreased so much, there was no way he could sell, he said.

“I'm on a very well-paid job, roughly $140,000. I shouldn't be having to struggle like this. I get nothing from the government, but pay $40,000 in tax, and rates will hit me next.”

He was now signing up to do Uber driving on the weeks that he did not have his children, he said.

A reader with a $680,000 mortgage and 26 years left on the term was on a 2.5% rate until October, but said his family would find it very tough after they refixed.

“If we jump to say 7% then we'll be paying an extra $400 per week. Our weekly budget currently has nothing spare, before the rise.

“My partner and I are on reasonable incomes of about $150,000 pre-tax combined. But we have four kids, and with the cost of everything going up, we are barely holding on.”

They did not know how they were going to be able to come up with that much more money every week, he said.

“One option is to go interest-only, but given our age, extending our mortgage term for another year or two will mean we may be forced to work beyond 65.”

One Christchurch reader said her family had several mortgages under different scenarios, and would feel the increase in rates.

The family home was split into three mortgages, so only one third was coming up off 2.95% in November to whatever was the rate then, she said.

But the rate on a property they own and “rent” to her parents to make housing more affordable for them on the pension had gone from 2.35% to 6.39%.

“They pay half the mortgage, and we pay the other half. So not only is this a hit on our outgoings when trying to help family out, but also on their pension payments.

“We also have a rental which has gone from 2.49% to 6.35%. Even with a rent increase for a new tenant we now have a shortfall to cover.”

Add in childcare, and the increase in petrol, groceries, and so on, and it was not a great combination, she said.

“But there is no crystal ball, and we haven’t locked in for longer than two years. We do think rates will come back down. We just have to wear the pain for now and work out other ways to save costs.

“On my partner's first house the rate was closer to 8%, so for him it’s not as bad as it could be.”

Meanwhile, 3% of 1091 survey respondents thought they might have to sell a property in the next year because of higher interest rates, according to the new Horizon Research Banking Monitor.

That figure was equivalent to 43,000 people with a mortgage.

The research also found that 23% of, or 303,000, mortgage holders were very concerned they might not be able to afford their repayments if their mortgage was refixed at the current floating rate, or a higher fixed rate.’