Inflation, cost of living continue to hit Kiwis, new figures show
Mortgage applications have fallen 11% year on year, while new mortgage borrowing is down 37% compared to September 2021, new figures from Centrix have revealed.
The trends are occurring as the New Zealand property market cools.
Credit bureau Centrix’s October Credit Indicator shows that Kiwi consumers are weathering an economic storm.
“The economic climate remains challenging for many Kiwis as they continue to adjust to the impacts of inflation and the rising cost of living,” said Centrix managing director Keith McLaughlin (pictured above). “The Reserve Bank raised the official cash rate for the fifth time in a row to 3.5% – the highest level in over seven years – and interest rates are continuing to climb. Alongside this, Stats NZ recently reported the cost of living for the average Kiwi household increased by 7.7% in the September 2022 quarter.”
Read more: Mortgage applications drop 25%
McLaughlin said mortgage applications and lending were down.
“While consumer credit demand is growing, mortgage lending is trending down as the housing market continues to decline and we come off record highs last year,” he said. “However, these figures remain unchanged month-on-month. Looking at mortgage arrears, these have edged above 1.0% for the first time in six months with 14,600 mortgage accounts past due.”
Consumer credit demand was up overall, however.
“Consumer credit demand has well and truly returned to pre-pandemic levels which was driven by an increased volume of personal loan applications,” McLaughlin said. “Demand for personal and vehicle loans remain strong despite the challenging economic climate, with new credit card applications up 3% year-on-year. New consumer loans granted in September were 18% higher than September 2021, which reflects the expectation that consumers are increasingly turning to credit to fund spending.”
Read more: Lending demand continues to tumble
McLaughlin said the economic squeeze was being reflected in borrowing as consumer credit demand started to climb back to pre-pandemic levels, with personal loans on the rise.
“Despite this, consumer arrears appear to be levelling out month-on-month as Kiwis begin to manage this new reality. While mortgage arrears have crept up slightly, this comes off several months of record lows and is to be somewhat expected,” he said. “There are nearly 2.1 million Kiwi consumers who have credit cards – however, the number of holders of multiple credit cards is down 33% since 2019 as many people chose to pay off and close their accounts during the pandemic. However, 10.6% of the active credit population were behind on repayments, up 2% year-on-year and of this, 4% are currently 30-plus days past due and 2.3% are 90 plus days past due.”
Looking at New Zealand businesses, McLaughlin said the hospitality and construction sectors were feeling the crunch.
“Both sectors have seen an upswing in defaults due to supply chain issues and the overall slowdown in consumer spending. Overall increases in costs are becoming difficult to pass on to customers who are far more aware of their expenses at the moment, making the ongoing impacts of inflation that much harder for Kiwi business owners,” he said. “Presently, there appears to be no silver bullet in sight to end the cost-of-living crisis many Kiwis are experiencing. For those feeling the pinch who are worried about missing repayments or getting further into debt, now’s the time to reach out to your bank or lender to discuss what options are available.”
