With the cost of living front-of-mind for so many, ‘mortgage anxiety’ is on the rise. How do we make sure this doesn’t leave people feeling hopeless about their financial situation?

Money isn’t everything. But for most of us, it’s easier to deal with anything else in our lives if we know the bills are getting paid. So when household budgets come under pressure from cost of living increases – especially when those increases include the mortgage that keeps a roof over your head – it’s easy to feel concerned. But while mortgage anxiety is a real phenomenon, it’s how you deal with it that really matters.

“It’s almost a bit of a misnomer to call it anxiety,” says psychotherapist Kyle MacDonald, “because when we think about anxiety, we think about a mental health symptom where the feeling needs treating. But I think, actually, it’s probably better to think about this as a reasonable fear.

“Because, you know, if you have a mortgage and the interest rates are going up, and we’ve been told every day that we’re heading towards a recession and things are gonna be calamitous, then it’s pretty reasonable to be worried about that.”

It’s not so much the worry, it’s what we do when we’re worried. One of the markers of anxiety, he says, is avoidance. But that’s where obvious and practical advice can be very useful.

“If we’re prone to avoidance behaviours with anxiety, we’re going to tend to just not open the email with the bank statements and ignore all communications and just cross our fingers and hope for the best, right? Which is not a great approach. 

“But if the fear and the worry actually motivates you to take action, then I would suggest it isn’t problematic anxiety… Hopefully the fear prompts us to do something which reduces the stress.”

It’s advice echoed by ANZ Home Loan Coach Marie-ana Tupo.

“Many homeowners are feeling the impact of higher home loan rates and day-to-day expenses,” she says. “If you are experiencing financial challenges, or think you might in the future, it’s important to reach out to your bank early so they can explore any options available to you that may help relieve the pressure.”

It’s also important to think ahead – and even to think of the worst that could happen. When Dan* and his partner borrowed $700,000 to buy an apartment in the inner Auckland suburb of Kingsland eight years ago, he says, they didn’t just look at what they could afford at the time.

“We stress-tested to about 8% or 9% mortgage rates,” he says. “Because we thought it’s better to be safe than sorry. I didn’t want to get into a position where we couldn’t afford to do it. I had advice from people who had mortgages and they said, do the due diligence on this because you don’t want to be in a position where the interest rates could go up and you’d be buggered, right? And lo and behold, it’s coming to pass.”

It also pays to act when the going is good – as it was for mortgage borrowers not that long ago.

“We refixed one portion of our mortgage in July last year, which was great because we got 2.6% – which is just crazy,” says Dan. “So then we started smashing it – we actually upped our mortgage payments, because you’re paying off so much principal it’s crazy not to.

“We were ahead of the game essentially. We’ve been paying more, over and above what we’ve had to. So it’s just going to be that we’re paying more interest as opposed to principal. I’ve worked out, we could get to about 10% interest before we started to feel a real loss in terms of change from what we’re already paying, because we’re already paying quite a bit more than what we could be.”

While there are clear benefits to forward planning and preparation, it’s not always possible and circumstances can change. However, there may be other options to consider, whether you’re trying to get ahead or need to relieve the pressure. ANZ’s Tupo says many mortgage customers aren’t actually aware of what their options are until they get in touch.

“Reviewing your loan structure is a good starting point. You may be able to extend your loan term or switch to an interest-only repayment structure for a period of time. Your banker can talk you through these options; whether they are suitable for you and what they mean for you over the longer term. The sooner you talk to your bank, the more options they may have available for you.”

In times like these, of course, even the best-laid plans can be undone by the world. Ezra* and his partner put down a deposit on a new build in Auckland in August 2021 – and a week later the city went into what would be a long lockdown. They moved in early January, four or five months later than when their new home was originally supposed to be ready.

“In the grand scheme of things it’s not a huge delay,” says Ezra. “But we were in the unfortunate situation where we basically bought at the absolute peak of the market – and then had to sit for a year and a half as mortgage rates rose as well.”

It can be a confusing environment for existing homeowners too, says Tupo, especially for those looking to refix . Many want certainty around what their repayments will be when their current fixed rate ends, but simply don’t know what to do, she says. ANZ offers the ability to reserve a mortgage rate up to 60 days before a fixed rate term ends, she points out.  

“Rates can move up or down, so if you do want to lock in a new fixed rate ahead of time, it’s important to make sure you don’t need to make any further changes to your loan, or charges may apply. This includes if you change your mind about the agreed rate.”

“This would also be a good opportunity to have a look at your loan structure and make sure it is right for you. If you have any questions or just aren’t sure where to start, we are here to help. Whatever your situation, there may be options we can explore to help you get ahead or relieve the pressure.”

Taking advice from their mortgage broker, and speaking to their bank, Ezra and his wife managed to lock in the rate they wanted before settlement and even got some cash back from their bank to contribute towards their savings goals. 

In the year they spent waiting until they actually had a house they could get a mortgage for, they saved hard for their eventual deposit.

“We’re definitely not gearing up for the year that we thought we were,” he says. “But [we took] our own austerity measures in the last year of savings, [and now] we’re assuming that it’s now going to be the same for the next two years – basically living as we had been while saving for the deposit.”

Ezra and his partner cut back on, but didn’t entirely cut out, things like going for coffee or an occasional meal.

“I’d hate for that to be a barrier for people to home ownership. But we were surprised at how much we actually were able to save by doing that, and efficiencies with shopping and that sort of thing. Basically doing a supermarket shop and making it last two or three weeks.”

As outrageous as their fortune has been, Ezra and his partner are still glad to have a new house of their own.

“I still think we’re far better off having property than not,” says Ezra. “We’re basically thinking if we can make it through these two years of struggle it will be a lot easier [afterwards].”

Even before talking directly to an ANZ Home Loan Coach (which you can do either face-to-face or over the phone), there are articles explaining why rates are rising, how to go about financial planning and more on the ANZ website, Tupo says. The ANZ Property Unlocked webinars, presented by subject matter experts, help customers understand the home-buying process from start to finish, covering topics such as using your KiwiSaver balance towards your first home.

You can also expect your bank to test your ability to pay at higher rates than those currently advertised (ANZ calls these “servicing sensitivity rates”). Don’t be offended – it’s not just you.

But whatever the stage you’re at or position you’re in, the key message is that hiding and doing nothing isn’t a good option. Doing something is always better – even if, says MacDonald, that something is just a thing you can still do for free.

“The uncomfortable reality for some of us is that actually changing our budget, looking at our priorities, really thinking about what’s important to get through this next little patch might just be the reality.”

*First names have been used for privacy.

ANZ lending criteria, terms, conditions, and fees apply to ANZ home loans.