In response to the Reserve Bank governor’s comments today about banks supporting households and businesses in the current economic environment, New Zealand Bankers’ Association chief executive Roger Beaumont says:
“Our banks are very conscious of the impact current economic conditions will have on many New Zealanders. Anyone experiencing financial difficulty should contact their bank to discuss their options. The sooner you talk to your bank, the more likely they’ll be able to help.
“Options could include lengthening the term of your loan, to reduce the amount of regular repayments. In some cases, temporarily moving to interest-only repayments may also be an option. Our banks are here to help.
“Banks are responsible lenders and when assessing a loan application they apply higher ‘serviceability’ rates to see if you could still repay the loan if interest rates go up. So typically, there’s a buffer already built in for borrowers.
“Many borrowers are also well placed to face an increase in interest rates because they’re ahead on their loan repayments. In June nearly 46 per cent of people with a home loan were ahead on repayments. As interest rates declined over recent years to historic lows, these borrowers likely retained their repayments at the same level, or increased them, to help repay their loans faster, which shows a good level of financial capability.
“There’s a similar story for people with credit cards. Around two thirds of card holders pay off their balance without incurring any interest costs.”