Mortgage delinquencies down in July but still up year-on-year
Consumer arrears have continued to rise despite the OCR holding steady at 5.5% and amidst the lingering cost-of-living crisis, Centrix’s latest data showed.
Centrix’s August Credit Indicator showed that 426,000 New Zealanders, or 11.7% of the credit active population, were now behind on their debt repayments, compared to 414,000 only a month ago.
Current arrear levels were up 7.5% compared to the prior year, and were back to levels seen in 2018, prior to the COVID-19 pandemic.
Mortgage arrears fell for the second consecutive month in July, with 18,800 mortgage accounts past due. Despite the drop, mortgage delinquencies were still up year-on-year by 31% after record lows recorded in 2022.
Opotiki District registered the highest mortgage arrears, at 3.37%, up 0.45% on last month’s statistics. This was followed by the Waitomo District and Far North District.
Also recording a monthly decline was Buy Now, Pay Later (BNPL) arrears, which was down for the second consecutive month to 9.4%, the lowest since February of this year, “signalling the Kiwis are working hard to get on top of their discretionary credit repayments,” said Keith McLaughlin (pictured above), managing director at Centrix.
Meanwhile, personal arrears were up 9% in July and increased 17% compared to last year. Vehicle loans arrears increased to a three-year high of 6% of active accounts.
Credit card arrears had an uptick to 4.3% but were still low compared to historical levels.
Retail energy past due had a marginal rise to 3.6% in July. Household telco arrears have climbed a mere 0.2% year-on-year, from 8.2% to 8.4% in July.
“Active credit consumers aged under 25 appear to be struggling quite consistently in recent years,” McLaughlin said. “The debt stress for the demographic has seen noteworthy growth since pre-pandemic times, with credit such as telco and personal loans going into arrears ahead of BNPL and credit cards.”
The Centrix report said consumer credit demand increased 10% in August compared to last year, with new personal loan activity now at its highest level this year to date.
New mortgage borrowing remained down year-on-year in July, but the rate of decline has significantly eased, signalling the housing market downturn could be coming to an end. Non-mortgage lending, on the other hand, was up 2%, driven by recent growth in new vehicle loan financing and credit card lending, but remained low on pre-pandemic levels, down 2% on July 2019.
In the business sector, both credit defaults and company liquidations increased across the board year-on-year as Kiwi businesses continued to be impacted by the challenging climate.
“Perhaps this is a sign of settling into a new financial situation for our county as we can properly assess how things will shape up following huge amounts of stress on both consumers and business owners,” McLaughlin said.
The Centrix leader said the remainder of 2023 will continue to be challenging for Kiwi households and businesses alike.
“We implore those going through financial stress to seek advice and speak with their credit providers early to come up with a proactive plan sooner than later,” McLaughlin said. “If you’re considering opening a new line of credit, or are concerned about the current climate, make a habit of checking credit scores and make informed decisions to reduce the chances of accruing bad debt during this time.
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