Rob Stock: Extraordinary strategies to cope with extraordinary mortgages

A child's conception of a home is simple, beautiful, and increasingly beyond the reach of young couples.
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A child's conception of a home is simple, beautiful, and increasingly beyond the reach of young couples.

OPINION: Naughty, naughty, New Zealand households, you have borrowed far, far too much money.

The International Monetary Fund thinks households here should be worried by how big their debts are.

New Zealanders were late arrivers at the global debt party, but we made up for lost time when we got there.

Back in the 1980s, banks the world over waved their magic money wands, and household debt as a proportion of GDP rose globally from 70 per cent (1980) to 128 per cent (2015).

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New Zealand is on course to reach an Ireland-like 168 per cent by 2022.

Big debts = heightened chance of financial crisis, spiking unemployment, and mortgagee sales in the IMF's books.

Of course, telling households off is pointless.

Apart from having done a poor job of electing councillors and MPs who gave a fig about rising house prices, none of this is really their fault.

Each one lived the best way it knew how.

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They bought houses, mostly to live in, which is an action as Kiwi as eating fish and chips, watching the All Blacks, or having complicated feelings on Waitangi Day.

Owning a house is the absolute heart of our culture.

So when house prices went up, and up, and up, people who could borrowed extraordinary amounts of money to get one.

Just as it sees high debts as risky for a country, so too would the IMF look with a frown on the risk a couple who borrowed 6.5 times their before-tax income to buy a house have been forced to take on leaving them extremely vulnerable to shocks like job losses or a spike in interest rates.

Let's be clear. I, and many of my age never had to do anything so risky.

But what could people do? When you are born into extraordinary times, you have to do extraordinary things.

An extraordinary debt (which to me is anything over four times household income) requires an extraordinary debt clearance strategy to get it down to a level where a couple can cope with it on one income.

That means going for options like:
* second jobs before children come along
* extraordinary frugality
* letting out rooms
* living with second hand furniture
* running one car, at most
* pursuing pay rises, and promotions with singular focus

It also means crisis-planning with family.

Would family help with repayments in a crisis, or let the kids move back in, so the debt-encumbered house could be rented out?

I hear people tell young folk who can't afford to buy in the city of their birth to get the hell out of Dodge and live somewhere else.

It's a level of casual economic cruelty and neglect that marks the last decade.

Telling young New Zealanders they shouldn't expect to live an ordinary life in their home cities is extraordinary.

That's why Labour polling shows affordable housing is the number one issue for parents and grandparents in the coming election, and why National has now decided to build affordable homes, just like Labour.

GOLDEN RULES:
* Pay down debt fast
* Live frugally to do it
* Vote

 - Stuff

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