Squeezed between a rock and a hard place

Mortgage holders can expect at least another six months of struggling to save or cope with unexpected bills as they are squeezed by high interest rates and poor economic conditions.

A Talbot Mills survey commissioned by Kiwibank shows nearly one in three respondents could not cover a $500 unexpected bill without borrowing, selling something or using a credit card. People are struggling to save and budget.

Kiwibank chief executive Steve Jurkovich says he sees no relief in sight for stressed and stretched households as interest rate cuts won’t kick in until at least the end of this year and probably 2025.

Domestic inflation has been stubborn and the Reserve Bank says there is a way to go before it can consider OCR cuts.

The research found almost two thirds of kiwis (63%) are struggling to put money aside for saving with high cost of living cited as the main barrier (73%), 37% of respondents say they don’t have money set aside to cover any unexpected expenses, and 34% say they feel like they are hit with an unexpected expense at least once a month.

Jurkovich says the findings provide critical insight into the state of savings in a high cost of living environment.

“While it’s encouraging to see that some New Zealanders are managing to save and set financial goals, the research shows that a large portion are vulnerable to financial shocks,” he says.

Mortgage rates, while not historically high, are much higher than they have been over the past three years and costs such as higher insurance premiums, which are non-negotiable, are putting the squeeze on people.

“Despite these challenges, some Kiwis are working towards specific financial goals. One in three savers (35%) have a defined savings target. Among these, the most common goals include emergency funds (44%), vacations (36%), retirement (31%), and homeownership (20%).

Jurkovich says the high cost of living is undeniably a very big driver of the situation.

“We know many Kiwis are doing it tough right now but what we also learned is that they understand the power of budgeting and saving, which are key enablers to building financial security."

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