Report reveals dramatic increase in mortgages in arrears

Changes came after mortgage deferral scheme ended in March

Report reveals dramatic increase in mortgages in arrears

Many homeowners struggled to pay for their mortgages in April after the government-backed mortgage deferral scheme ended in March, according to credit reporting firm Centrix's latest report.

The report revealed a 10% increase in the number of mortgages in arrears last month, totalling around 11,900.  It resulted in concerns that the level of arrears would skyrocket, which might result in forced mortgage sales.

However, Centrix managing director Keith McLaughlin said the situation is not as bad as first thought.

“I think [the level of mortgages in hardship] could have been a lot higher if there had not been as much co-operation between the lenders and the borrowers, and I think it really reflects well on the willingness of both parties to work through the difficult situations and either restructure loans or come up with some alternative way to avoid consumers going into hardship,” McLaughlin said, as reported by RNZ.

Meanwhile, demand for credit remained strong at 94% of pre-COVID-19 levels. New mortgage lending also increased by over a quarter in March, setting a new record for the month.

McLaughlin expects the number of mortgages in arrears to rise slightly in the coming months. However, mortgage sales would be unlikely because borrowers in hardship could still take advantage of the red-hot housing market and sell their properties.

“While March usually sees strong activity in the housing market, we anticipate it was particularly high this March as house purchasers looked to financially settle ahead of the Reserve Bank's LVR restrictions coming into effect,” McLaughlin said.

Centrix's report also noted a continued appetite for automotive finance and credit from “buy now, pay later” services, such as After Pay – which McLaughlin said occurred following the collapse in the credit market this time last year when the country went into the level 4 lockdown.

“This indicates there continues to be a high level of confidence in the economy,” McLaughlin added.