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Violet says there are people in her family who have kids, and people who own houses – but few in her generation who have been able to have both.
The Wellington woman, who does not want to be identified, bought her house in April 2021 with a friend.
They fixed their mortgage for two years, paying $825 each a fortnight. But when they went to refix, the repayment increased to $1232.50 each.
She said the increase seemed to hit harder because they had not had a chance to pay off much of the principal yet.
“For me, this is the difference between being able to afford to have children or a pet and not. I will probably be counted among the growing number of Kiwi women who miss the baby boat because I don’t think it’s right to have a baby if you can’t provide a stable home.”
She said anything extra that she had to pay for, such as having her car fixed, had to come from savings.
“There’s no cash for that. I think if I’d realised it would go this high, I might have tried to offer a bit less on the house.”
She said she was worried about how much higher interest rates might go.
She said they would try to hold on to the house for now.
“Don’t have a pet, don’t have anything like that, probably not going to go on holidays, not going to do anything that costs extra. It’s basically just live in a basic way. Just kind of hope that my savings don’t whittle away to the point where I need to think about things a bit more carefully. If I had to I would sell my car, I would just hunker down. Just grin and bear it for two years and see what happens.”
She said, as a millennial in her mid-30s, it felt as though she was in the first generation forced to choose between family and buying a house.
Sungmi Kim/Stuff
Rising mortgage rates have affected recent buyers in particular.
She is one of many homeowners who have been affected by the Reserve Bank’s efforts to quell inflation through higher interest rates.
Recent buyers have been particularly affected. At the end of last year, a quarter of 2021 buyers were estimated to be under mortgage stress at current interest rates.
The official cash rate has risen from 0.5% in 2021 to 5.5%, taking home loan rates from as low as 2% to between 6% and 7%.
Banks moved interest rates up again this week, although commentators said they should now be near or at a peak.
Glen McLeod, a mortgage broker at Edge Mortgages said he had dealt with a couple of people who were putting their plans for children on hold because of interest rates.
“Interestingly enough once you talk to them and explain the current situation, yes the rates are higher however the prices for housing is cheaper there seems to be some movement towards getting on with things.”
He said it would come down to understanding the balance. People would need advice on loan structures to protect them against further increases, he said.
David Cunningham, chief executive at mortgage broking firm Squirrel, said he could understand why higher mortgage rates would factor in to decisions about having children.
“Losing the additional income would be the major driver.”
He said a significant portion of the mortgage rate increase was yet to be felt.
”The average interest rate on existing home loans is almost 5%, from a low of 2.7%, and current interest rates are 6.5% or higher. So overall, average actual rates borrowers are paying are up 2.3% so far, with another 1.5% to come. In other words, home loan borrowers have so far experienced only 60% of the tightening cycle.”
Shirley McCombe, general manager at Bay Financial Mentors said anyone who was mindful of their financial situation would need to think about how and when they took on extra debt.
Gareth Kiernan, chief forecaster at Infometrics, said there was nothing obvious in the birth data to date showing a wider trend, and there were likely to be other factors impacting previous economic cycles.
“Most particularly the age profile of the population.”
He said there was a dip in birth rates for 25 to 39-year-olds in the March 2021 year followed by a lift in the March 2022 year and then a drop back in the March 2023 year.
“The 2021 and 2022 results kind of make sense given economic conditions and the uncertainty created by Covid. It’d be hard to pin anything yet on higher interest rates and associated debt-servicing costs, although the logic seems sound enough. Having said that, the GFC didn’t really seem to stop people having kids, except maybe for a bit during 2009.”
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