Here we go again. Another lockdown and more financial pain for New Zealanders.
It’s a timely reminder to all New Zealanders to seek help if needed and build up an emergency fund if possible. Lockdown brings financial pain to many but is a time when spending can drop and habits change.
People whose incomes haven’t been affected should consider getting themselves into a stronger situation financially, says Campbell Hastie, mortgage adviser at Hastie mortgages. “Resilience when times are tough is actually all about preparation, the work you did well before the crisis happened,” he says. “In my mind, a safety net should be one of those important things.” That’s having savings in the bank, or being ahead on your mortgage.
That’s not realistic for everyone. The next best thing to this is an overdraft or other credit facility to draw on in an emergency.
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What to do if debt is causing pain
If people find themselves in a hardship situation as a result of this latest lockdown then they should contact their lenders or mortgage adviser in the first instance and talk it through, says personal finance lead Tom Hartmann, personal finance lead at Te Ara Ahunga Ora Retirement Commission. “We always advocate that the sooner you talk to your bank the better.”
The Credit Contracts and Consumer Finance Act (CCCFA) requires lenders to consider amending contracts when customers make hardship applications. Borrowers can ask for the term of the contract to be extended, debt repayments deferred, or to pay interest only for a period, says Hastie. That applies to both mortgages and consumer debt, but not buy now pay later (BNPL).
It doesn’t mean you’ll get exactly what you think you want but at least you’ll have the ability to talk options and have the lender listen and consider, says Hastie.
Half of all Kiwi borrowers are ahead on their mortgage payments. Photo / Fiona Goodall
But the banks have been very good to vulnerable customers during the pandemic, adds Hartmann. “You might be surprised how willing they are to help.” They’ve seen almost every situation imaginable before and want to get customers back to regular repayments.
Loan debt: It’s important to get on top of this quickly because it doesn’t count if customers have been in default: for two months or more, or for two weeks after receiving a repossessing warning notice or Property Law Act notice or have failed to make four or more consecutive debt repayments. Both consumer lenders and banks must belong to a third party independent dispute resolution service that can hear complaints.
Mortgages: Half of all borrowers are ahead on their payments, says the NZ Bankers Association, which means they can take a payment holiday or in some cases withdraw the overpayments, but should check with the bank first. Hastie adds mortgage borrowers can become more resilient by having awareness of their finances, a clear picture of what’s important to their whānau, and then having the courage to deploy those finances towards what’s important.
What if you can’t afford KiwiSaver?
Saving for retirement is important. But another way to free up money in a crisis is to take a savings break from KiwiSaver for up to 1 year. It means missing out on the employer’s contribution, so shouldn’t be done lightly. Funds can be withdrawn from KiwiSaver in the case of significant financial hardship by members who can’t meet minimum living expenses, pay the mortgage, and other reasons. It’s not simple and it’s best to see a budget adviser before applying.
Having good level of savings in the bank can be a lifesaver, but not every Kiwi is lucky to be in that position. Photo / Getty Images
People who find their earning power affected by lockdown should check what their employment rights are, and if relevant, benefit rights.
Employees who can’t work during lockdown or where their employer has suffered a financial impact may qualify for the Covid-19 Wage Subsidy Scheme or other government assistance. Employers apply for the Wage Subsidy Scheme on employee’s behalf and pass that money on.
The Covid-19 financial support tool is easy to use and has information for employers, self-employed, employees, newly unemployed people and even temporary residents. It shows at a glance what these different groups are entitled to.
That includes packages such as the wage subsidy, Short-Term Absence Payment, Leave Support Scheme, Small Business Cashflow Loan Scheme, Temporary Loss Carry-Back Scheme and other support. Even a temporary visa holder not allowed to work may still be able to qualify for an Emergency Benefit.
Not everyone is going to qualify for the Covid relief from the government. There are also benefits through Work & Income and can check here. Anyone on a low income, not just beneficiaries can apply for special needs grants.
Not all employers have behaved legally or in good faith towards employees during previous lockdowns and this could be repeated. An employer can’t change hours of work or pay or force employees to do work unrelated to your job without consulting. More information can be found here.
