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The average household in New Zealand has faced a 31% increase in mortgage interest rate costs in the past year, according to Statistics New Zealand.
Stats NZ’s household living-costs price indexes for the June quarter show that the “highest spending” households have actually been more affected by the big rises in mortgage rates between June last year and June this year.
According to Stats NZ the highest-spending household group is spending about 7.3% of their expenditure on interest payments. This compares with 4.6% for the average household and 2.0% for the lowest-spending household group.
“This means the highest-spending households experience the higher interest rates more than other household groups,” Stats NZ says.
The Reserve Bank has been rapidly pumping up interest rates since last October, with the Official Cash Rate rising in that time from 0.25% to 2.5% and with more to come.
Most of the interest rate hikes have actually been this year, and the latest Stats NZ figures show that as well as 31% increase in interest costs for the year to June, the costs actually increased over 10% in just the last quarter between March and June.
Mortgage interest rates pretty much bottomed in June 2021, so, the latest figures from Stats NZ will have captured a big part of the subsequent rise. Future increases may not be as dramatic in size.
The release of the figures on Tuesday followed last week’s Consumer Prices Index release, which showed an annual inflation rate of 7.3%.
The CPI doesn’t include interest costs, but it does include inflation due to rising costs of building houses – which soared 18% over the year to June.
The living-costs price indexes include both interest costs and much more granular information on how specific earnings groups, and ethnic groups are affected.
“Each quarter, the household living-costs price indexes (HLPIs) measure how inflation affects 13 different household groups, plus an all-households group. The consumers price index (CPI) measures how inflation affects New Zealand as a whole,” Stats NZ says.
The cost of living for the average household, as measured by the household living-costs price indexes, increased 7.4% in the June 2022 quarter compared with the June 2021 quarter. The cost of living for highest-spending households increased 8.1%, while it increased 6.5% for lowest-spending households and beneficiary households. All the household groups faced their highest annual cost-of-living increase since the series began in 2008.
Higher prices for housing and petrol were the main contributors to the increase across all the household groups.
Annual inflation for lowest-spending households and beneficiary households was 6.5%. These households faced higher prices for petrol and rent, as well as grocery food and interest payments.
Beneficiary households spend about a third of their expenditure on rent. This compares with about 14% for the average household and about 5% for highest-spending households. Therefore, increases in the cost of rent impact beneficiary households more than other household groups.
The cost of living for Māori households was 7.6% higher in June 2022 compared with June 2021. This compares with 7.4% for the average household.
The increase was largely due to higher prices for petrol and interest payments, as well as for rent and grocery food.
Māori households spend a greater proportion of their expenditure on rent than the average household, at nearly 20%. This compares with about 14% for the average household. They also spend slightly more on private transport supplies and services, such as petrol. These contributed to their cost-of-living increase.
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