Earlier this week our Managing Director, Keith McLaughlin spoke to interest.co.nz about the decline in credit demand in Auckland due to the latest Alert Level 3, as well as the surprising number of people going into mortgage arrears who are not seeking a mortgage deferral. Read the interest.co.nz story here.

Our data shows New Zealand’s tourist towns are being hit hard by the economic impact of COVID-19, with Queenstown and Rotorua having the highest percentage of mortgages on payment deferral.

Our Managing Director Keith McLaughlin says 11.9 percent of mortgages in Queenstown and 8.9 percent of mortgages in Rotorua are registered as being on mortgage deferral.

“The mortgage deferral scheme, which was established by the Reserve Bank in March and extended this week, allows banks to offer their customers a temporary payment holiday without their mortgage being subsequently viewed as being in default,” explains McLaughlin.

“The temporary scheme aims to give those households who are financially suffering from the economic impact of the pandemic breathing space if someone in the household loses their job or if they are facing a significant drop in business or other income.

“With the restrictions at New Zealand’s border, we know many of the country’s tourist hotspots are doing it really tough right now. There are many tourist businesses that rely on international tourists who have being forced to reduce staff numbers, manage significant drops in revenue or temporarily close or shut up shop.

“It’s not surprising, therefore, that we see towns that rely heavily on the tourism market having a higher percentage of households with mortgages on the deferral scheme,” says McLaughlin.

Other towns that have high percentage of mortgages on deferral include Whangarei (8.7 percent), Taupo (8.4 percent) and Tauranga (7.6 percent). By comparison, Wellington has the lowest percentage of mortgages on deferral (3.8 percent).  Auckland and Christchurch have 6.8 percent and 6.3 percent of mortgages on deferral respectfully.

McLaughlin says mortgage deferrals are an important tool and can help households facing serious financial hardship manage their finances in the short-term by allowing them to temporarily stop their mortgage payments without their credit score being impacted.

“Many New Zealanders are struggling as a result of the impact of COVID-19 and mortgage deferrals can give them the time that they need to put in place financial plans, find new employment or pay down other bills to ease the pressure.”

McLaughlin does, however, provide a word of caution to households considering applying for a mortgage deferral.

“While a mortgage deferral won’t impact your credit score, it is important to understand that interest will continue to accrue on your loan and that your mortgage will grow if you are not making any payments.

“For this reason, mortgage deferrals are not necessarily the best option for everybody, but they are a far better option than missing ongoing mortgage payments, which can have very negative impacts on your credit score and make it difficult for you to borrow money in the future.”