Over the next six months, more than half of all mortgages will be due for repricing
As New Zealand's economy gradually recovers from the recession, households are beginning to see some financial relief, though challenges persist, according to the latest data from Stats NZ and insights from Satish Ranchhod (pictured), senior economist at Westpac NZ.
Despite a 2% increase in total after-tax earnings last year, real income growth per household remained modest at around 1%, barely keeping pace with a 1% population increase and falling short of the 2.2% rise in consumer prices.
The stagnation extends to households' wealth, with the net value of assets barely moving in 2024.
For the 12th consecutive quarter, savings rates have declined, marking a persistent trend of financial strain. However, there's a reduced spending on interest costs—the first decline since 2021.
"Spending on interest costs is still high – we estimate that the average household with a mortgage currently spends around 21% of their income on interest costs (compared to pre-pandemic averages of 16%). Even so, this easing in interest costs will be welcome news for many households," Ranchhod said.
The good news is that this figure is expected to decrease further. Over the next six months, more than half of all mortgages will be due for repricing, which could reduce rates.
"For instance, if you had fixed your mortgage one year ago, you could be paying a rate of around 7.16%. If you go to refix now, the one-year rate is 5.29%. For an average priced home with a 50% mortgage, that could put around $400 per month back into your wallet," he said.
This reduction in mortgage payments is likely to improve household spending and contribute to a gradual economic upswing anticipated through 2025.
