Does debt discriminate?

February is our month for diversity in Aotearoa with Valentine’s love the focus for some, while others reflect on Te Tiriti o Waitangi, and yet more throw in the colourful Pride Festival. As a nation we are progressing but there is a long way to go before all people are truly accepted and respected.

At Debtfix, the Crew thought it was a good time to consider if debt discriminates in New Zealand.

Do some sectors of our community have a tougher time breaking out of debt cycles than others? If so, how can Debtfix change this?

Different types of debt for different New Zealanders

Debt and a person’s net worth go hand in hand when determining their financial resilience. That is, how much a Kiwi owns and how much money they have in the bank will influence how much debt they have and how they manage that debt.

New Zealand Pākehā are more likely to have mortgages, which puts them on a positive pathway to freehold home ownership as they grow older.

Stats NZ Tatauranga Aotearoa reported in 2015, that “even after removing the effects of age structure on the ethnicity data, it is evident there was a large difference in the median net wealth of European people compared with other ethnic groups.”

Although Pākehā may have bigger debts, because mortgages can be in the hundreds of thousands of dollars, the debt is a smaller proportion of their overall net worth.

They owe more but they also own more.

At the same time, Māori and Pasifika people had more debt in comparison to how much they owned – being less likely to own a home than their Pākehā buddies. Therefore, if some sectors of society don’t have homes with mortgages but they do have debt, it will be personal debt.

Personal debt could include hire purchase agreements, buy now pay later deals, car loans, student loans, credit card and other high interest loans, outstanding bills and rent arrears, etc.

Please note, the information discussed by Stats NZ Tatauranga Aotearoa only includes individual wealth and does not consider that Māori may also share in communal and tribal assets, such as land or wealth that reflects Te Tiriti o Waitangi settlements.

Homeowners can ride financial waves

Home ownership is possibly the most significant factor that influences a New Zealander’s financial stability and ability to manage debt.

This is because they are not subjected to rent increases and mortgage repayments are usually lower than rent payments. Also, if the homeowners find themselves in financial hot water, they can sell their home and more often than not achieve a capital gain.

Homeowners tend to stay put in a home for a longer period, whereas renters moved on average 1.9 times in the previous five years. (Source: Housing in Aotearoa: 2020) Frequent moves and insecurity about your rental arrangement can affect the sense of control people have over their housing and create uncertainty about future housing circumstances.

Not a great living situation for anyone.

The Housing in Aotearoa: 2020 report identified that Māori and Pasifika “were less likely to own their home or hold it in a family trust than other ethnic groups” in New Zealand. “Owners tended to have higher income levels and were more likely to be partnered than non-homeowners.”

Supporting our LGBT community when they choose to get married, join in a civil union or live together indicates that step may also improve their financial stability. There were no statistics available to identify the variance of homeownership between men and women, but the 2020 gender pay gap shows men continue to earn 9.5 per cent more than women.

Also, as New Zealanders age they are more likely to own a home, which just makes sense because they have had time to accumulate wealth.

The indications are New Zealanders with higher levels of personal debt than secured debt are more likely to be:

• Renters or homeless

• Young

• Māori

• Pasifika

• Single

• Women

Debt does discriminate and what is Debtfix doing about it?

Debt is widespread across all sectors of New Zealand society but the bulk of it is in mortgages, which is offset by homeownership and capital gain. Accumulating wealth is more likely to be achieved by some groups and therefore problem debt is more likely to be experienced by those on lower incomes and without the capacity to buy a home.

Desperation can force them into expensive borrowing arrangements that further undermines their financial stability. It doesn’t need to stay like this though. Debtfix finds debt solutions for people who are the most vulnerable to financial instability.

In Debtfix’s 2020 Wellness Survey, it identifies the Debtfix Crew is reaching and helping the sectors of our community who are most likely to need debt solutions.

Debtfix recognises our Crew must reflect those we serve and we have recruited a diverse team that has experienced personal challenges that enable them to empathise with people who need debt solutions.

We are committed to learning about New Zealand’s increasingly diverse population and we are always looking out for better ways to guide those who want to stay afloat during financial storms.