Arrears rise slightly, financial hardship increases
Despite avoiding a technical recession, New Zealand households are still grappling with credit challenges.
“The number of consumers behind on their payments rose slightly by 1% month-on-month,” with 461,000 New Zealanders now in arrears, representing 12.31% of the credit-active population, said Keith McLaughlin (pictured above), managing director of Centrix.
Financial hardship cases have surged by 24% year-on-year, particularly among those struggling with mortgage payments, credit card debt, and personal loans.
Home loan arrears decrease slightly, but remain elevated
Mortgage delinquencies saw a slight improvement in August, with 20,700 home loans reported as past due – a drop of 300 from the previous month.
However, McLaughlin noted that mortgage arrears are still 12% higher year-on-year, indicating ongoing pressure on households.
Mortgage demand remains tepid, with new home loan applications up just 0.2% compared to last year, as rising interest rates continue to squeeze borrowers.
Business defaults on the rise across key sectors
Businesses are feeling the brunt of the economic downturn, with credit defaults rising by 5% across all sectors, particularly in the construction and transport industries.
Construction firms account for one in four company liquidations, with 546 construction businesses going under in the last 12 months.
Non-residential construction companies saw an alarming 78% increase in liquidations year-on-year.
“Small business mortgage stress remains high, particularly for sole proprietors, who are facing double the debt stress compared to non-business owners,” McLaughlin said.
Credit demand shifts as households seek alternatives
Although overall credit demand is down 4% year-on-year, there has been a notable uptick in credit card applications, which reached their highest levels since November 2021. This suggests that consumers are increasingly turning to credit cards to manage their financial obligations.
In contrast, non-mortgage lending, including vehicle loans and personal loans, dropped by 14.2% year-on-year, reflecting weaker demand, especially for new car sales and electric vehicles.
Financial hardship rising across age groups
Financial hardship cases have been climbing steadily since November 2022, with a 24% increase year-on-year.
Nearly half (45%) of these cases relate to mortgage difficulties, while 29% are linked to credit card debt.
The hardest-hit age group is those between 35 and 39 years old, reflecting the pressures faced by families in this demographic trying to juggle rising living costs and high mortgage rates.
Mortgage lending improves, but non-mortgage lending drops
While approved new mortgage lending increased by 7.8% in the August quarter compared to last year, it remains 32% below 2021 levels when the property market was booming.
Non-mortgage lending, such as personal loans and vehicle finance, is down 14.2% year-on-year, driven in part by lower volumes of new car sales, particularly in the electric vehicle market.
However, overall household lending saw a 5.5% increase compared to the previous year.
Access the Centrix report here. Compare the latest figures with previous reports here and here.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
