What's behind huge leap in total household debt?

Stats NZ data shows more Kiwi households are feeling the pinch

What's behind huge leap in total household debt?

Mortgage is behind the 29% increase in total household debt since 2018, according to Stats NZ.

Half of Kiwi households with mortgages have debt of less than $260,000, while the other half have over that amount.

“While only 32% of households have a mortgage on the primary residence, for those households, the median property debt increased to $260,000 in the year ended June 2021, up $56,000 over the three years,” StatsNZ said.

Read next: How easy is it to afford a house in New Zealand?

By contrast, mortgage had only risen by 18% from 2015 to 2018, with the median house value at $328,000. By 2021, the median house value climbed 21% to $397,000. These were primarily driven by the increased value of owner-occupier dwellings, other real estate, and property held in family trusts.

Meanwhile, the house price to income ratio is also seeing a more significant divide, CoreLogic reported, with property values increasing by 38% while income has increased less than 3% from March 2020 onwards.

Andrew Neal, senior manager of wealth and poverty statistics at Stats NZ, said other real estate loans also share a similar trend with mortgages, increasing the total household debt by 44%. Stats NZ also revealed Kiwis have a $25 real estate loan for every $100 of property owned.

Consumer loans, student loans and other liabilities make up the remaining 11%.

Read more: OCR hike will see average mortgage holder pay an extra $825 a year – RBNZ

However, the total household debt is still expected to surge now that the Reserve Bank of New Zealand (RBNZ) has lifted the official cash rate (OCR) by 25 basis points to 1%. This will cost the average mortgage holder an extra $16 a week.

Although mortgage rates are rising, they are still low relative to its longer-term history, interest.co.nz reported.