Mortgagee sales hit new high

The number of mortgagee sales around the country has bounced back to a record high after dipping briefly in August, dashing hopes the worst effects of the recession may be over.

And with banks quietly moving to raise their short-term fixed mortgage rates, some people could find it even harder to hang on to their homes.

Latest figures show 343 mortgagee sales were recorded in September – a 42% increase on the previous month's figure of 241, and a 2000% increase on the 16 sales in September 2007 when the property boom was at its height.

Mortgagee sales accounted for 4.7% of the 6400 property sales recorded in September.

Mortgagee sales serve as a strong indicator of how the economy is faring. In August they fell for the first time in six months, sparking speculation the worst effects of the recession were over. But these latest figures, released by property and land information company Terralink, suggest many homeowners are still struggling to meet financial commitments.

Although the main centres still account for the bulk of mortgagee sales, it was the regions that experienced the biggest increases last month. Notable jumps were in Northland, Waikato, Bay of Plenty, Manawatu and Otago (see table).

Terralink managing director Mike Donald had expected the figures for September to be up on the previous month but was surprised by the scale of the increase.

"It is a record," Donald said. "While we had thought it [mortgagee sales] would continue at a high level, we had thought it had reached its peak, but that doesn't look like it's the case, indicating that as unemployment rises and SMEs [small to medium-sized enterprises] struggle, it is impacting on the ability of homeowners to keep up with their mortgage payments."

Donald said about a fifth of the mortgagee sales involved "mum and dad" property owners – people whose family home was their only property.

"The ones who are most getting into strife are the individuals who own more than one property or the entities or corporations that are property investing or property developing," Donald said. They accounted for 74% of the mortgagee sales.

The figures come as banks raise short-term fixed mortgage rates, suggesting the time for cheap loans may be coming to an end. ANZ increased its fixed rates last week for six-month, one-year and two-year terms by about 25 basis points to 5.99%, 6.2% and 7.25% respectively. ASB Bank made a similar unannounced increase earlier this month and it now has the highest one-year fixed rate of 6.25%.

Economists are generally advising homeowners taking out a new loan or rolling off a fixed-term mortgage to fix for a short period or opt for the cheaper floating rate. ASB and National Bank have the cheapest floating rates at 5.75%, whereas ANZ is the most expensive at 6.45%.

Although those rates could make it easier for first-home buyers to get a foot on the property ladder, the Reserve Bank is cautioning against relying on rates staying at those levels. In its half-yearly Financial Stability Report it advises homeowners to look to the long-term fixed rates, which have risen to as high as 8.75%, as a "better guide" to the medium-term cost of a mortgage.

The Reserve Bank is also urging the banks not to return to the risky lending of

- © Fairfax NZ News