The mortgage deferral scheme winds up today almost a year after it was introduced.
About 95 percent of people have stopped using the mortgage deferral scheme and back are to making some form of repayment (file image). Photo: 123RF
The scheme was rolled out in response to the pandemic to help mortgage holders experiencing hardship to defer principal and interest payments until they got back on their feet.
Data out from the credit reporting firm Centrix showed that at its peak 54,000 people had about 80,000 mortgages on deferral, about 7 percent of all mortgages.
Among those were Queenstown-based tourism operator, Nik, for whom the scheme was a lifesaver.
Covid-19 threatened to end his business and plunge him and his family into significant financial hardship but the deferral scheme gave him a great deal of breathing space.
"It meant that we could be confident that our cash reserves wouldn't be exhausted quickly and that we would have time to prepare for a longer term game of a significantly downturned market," Nik said.
When Nik came off the scheme in September, he tried to put his mortgage back on given the scheme had been extended, but his bank declined and he was forced to go back to making full repayments.
That led to a lot of stressful nights as the rebound in tourism after the first lockdown had not been as strong as anticipated and doubts were raised about how long the business could continue, Nik said.
But he received positive news this week when his application to make interest only payments on his mortgage were approved by the bank.
"That will make sure that we can keep trading right through to possibly the end of this year and then we'll need to look again at what we do after that."
Banks must continue to be flexible and help customers manage their debt, even with the scheme's completion, he said.
Bank support?
Nik's mortgage was among the 95 percent of home loans that had already come off the scheme and were back to normal repayments, but that left just under 4,000 mortgages on deferral right up until the end.
So, what's next for those still struggling to pay their mortgages?
ANZ bank's managing director personal Ben Kelleher said it had fewer than 300 customers on the scheme towards the end and expected most of these to get back to some form of repayment.
"Some may go back to interest only or extend their home loan terms and those that can't that are still struggling will be referred into our customer financial well-being area and we will work with them on a case by case basis to help them get back on track," Kelleher said.
ASB took a bold approach, stating in its half year it would not force any mortgagee sales for customers struggling through the pandemic.
Kelleher said ANZ would not follow suit as it was not in the bank's, nor the customers, best interests.
He stressed mortgagee sales were a last resort and said if all other options failed customers were probably better off selling their homes to pay back their loans.
Other banks spoken to by RNZ said they would continue to work with its customers to find the best payment resolutions.
They said mortgagee sales were incredibly rare in New Zealand but could not rule them out.
Arrears down
Centrix's data shows the number of mortgages in arrears were down 15 percent on last year to 17,000, largely due to the support provided by the scheme.
Now that the scheme had ended, the credit reporting firm now expected arrears to climb.
Kelleher said increases were possible but the situation was a lot better than many had predicted 12 months ago.
"On the whole we're seeing lots of businesses across the economy doing pretty well, some that are struggling... I think we will see patches but all bets are off the table if we continue to go through lockdowns."
FinCap consumer issues adviser Jake Lilley said if people did find themselves in trouble there were plenty of people who could help.
"If someone is looking at the end of the mortgage deferrals and they're not sure what to do I highly recommend calling the MoneyTalks' helpline and linking up with a financial mentor," Lilley said.
Mentors could look at all of someone's debts, work out their priorities and even contact creditors on their behalf, he said.
If you are having difficulty paying the bills and want to know your options, MoneyTalks is a free and confidential helpline that can connect you with a Financial Mentor. Call 0800 345 123 or visit https://www.moneytalks.co.nz/