Elderly Māori who had paid off their mortgages are now being forced to take on new debt – sometimes from loan sharks – to support their children and mokopuna through the cost of living crisis.

Household living cost price indexes, published yesterday by Stats NZ, show Māori are feeling the pain of the rising cost of living more than any other demographic – more than those on high incomes, more than those on low incomes, more than superannuitants, more than beneficiaries.

Te Pāti Maori co-leader Debbie Ngarewa-Packer says she’s talking with elderly people who have remortgaged their homes or, worse, when their banks say no, turned to high-interest loan sharks to borrow money to support children and mokopuna who can’t pay basic bills like food, or fixing a car to get to work.

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Though the consumers price index has been dropping, that doesn’t factor in interest payments on mortgages, credit cards and personal loans.

The household living costs price indexes tell a more worrying story, rising to 7.4 percent in the past year. Food and housing continued to be the key drivers of inflation.

The main contributors to higher living costs for Māori households were interest payments (28.2 percent), rent (5.3 percent) and grocery food (11.3 percent).

Interest payments and food inflation

Despite lower average earnings, many Māori do own their own homes – but they're often hard to get affordable finance on, especially when they're built on rugged, communally owned Māori land. This week's Stats NZ data suggests they may be paying higher interest rates, on average.

And in a week when ANZ and BNZ have followed ASB's lead by increasing their fixed-term mortgage rates so most are above the challenging 7 percent mark, Māori are particularly affected.

New data due out next week from the credit agency Centrix will show 1.25 percent of mortgaged home-owners are in arrears on their loan payments. That rate is steady – but what the data also indicates is that to avoid defaulting on their mortgages, people are missing other payments on their car loans, power and water bills, and in particular on personal loans. 

Arrears on utility payments have risen to 4.3 percent, car loans to 5.9 percent, and personal loans to 9.1 percent. 

Household loan arrears

The mortgage interest bill for New Zealanders has now hit a record quarterly tally of $4.627 billion, according to new figures from the Reserve Bank. According to interest.co.nz, that puts homeowners on track to pay their banks well over $17b in mortgage interest in this 2023 calendar year. 

For Te Pāti Māori, the new data reinforces the need for policy solutions such as removing GST from kai, removing income tax from the first $30,000 of earnings, and taxing the owners of "ghost houses" left unoccupied in the housing shortage.

The party also wants targeted solutions such as support to build more homes on papakāinga in rural areas – but perhaps most of all, they want the incoming government to help restore resources to Māori to deliver their own solutions.

Ngarewa-Packer says she regularly intervenes to try to help Māori families through cashflow crises.

"We've met with families, Māori and Pasifika, who are in cycles of continuous lending. The car breaks down and they need it to get to work, so they'll go in and get a loan for that, and they will then pay that off at horrific rates – and then go to get the next loan for the next problem.

"We've got three or four generations impacted by interest rates on the same loans – we've got the elderly that maybe own the home, then two or three generations of children who are working to sustain it. And there's a shame attached with the borrowing as well, so there's not often an openness about it. People are scared to ask for help.

"By the time we're rung to get involved, they've often fallen off the cliff, and it's a real dire situation. So the mortgagee sales and things that are going on, it's really tragic. It was a horrific cost. They were desperate,

"They're not spending on comforts and holidays and alcohol – it's just the fact that the car broke down, or the washing machine died. Have you ever wondered why so many people use laundromats? It's because they can't afford to replace their washing machines."

She tells of one whānau who were struggling to pay their mortgage, and then were hit by the costs of a leaky roof and a broken-down car. So they went back to the bank to borrow more on their mortgage to pay their bills.

And a Taranaki couple, aged 76 and 78, who had to get a loan from a high street lender, to get their power reconnected. "It was a horrific cost, but they were desperate. They couldn't get into their local WINZ office. And then, to pay the loan interest, they ended up going without food, and they wouldn't switch on the power that they'd borrowed to get reconnected!

"You can't get into the banks any more, you can't walk in, you can't get through on the 0800 line, everything's online, it's really tough. I think there's a generation who haven't been raised in the digital scene and are extremely embarrassed to be asking for help.

"We have to do more about our housing supply. We're not going to build everything in time to address the growing homelessness and affordability of homes. So, freeing up existing housing for whānau also makes sense."

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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