Arrears have now returned to pre-COVID levels, managing director says
As anticipated, there has been a surge in consumer credit demand in December and January, spanning both personal and Buy Now Pay Later products, as Kiwis leverage credit during the holiday retail sales season, Centrix has reported.
Centrix’s January Credit Indicator also showed a rise in arrears for December, in line with seasonal patterns, with 439,000 people falling behind on payments, that’s 12.01% of the credit active population, marking a month-on-month increase of 4,000.
Mortgage accounts past due surpassed 20,000 in December, reflecting a substantial 21% year-on-year increase.
Keith McLaughlin (pictured above), managing director at Centrix, said the escalation of telco and mortgage arrears to a four-year high indicated that arrears have now returned to pre-COVID levels, moving away from artificially low trends.
“Interestingly, the real estate sector has experienced an increase in first home buyers, who made up almost a quarter (24%) of all new residential mortgage lending in the fourth quarter of 2023,” McLaughlin said.
Loan conversion rates and CCCFA impact
In the context of New Zealand’s economic climate, McLaughlin said the recent 11% dip in loan conversion rates compared to the previous year aligns with broader economic shifts.
The “decline followed the introduction of the new CCCFA regulations in 2021. Since then, the CCCFA has had an impact on credit approval – especially for new credit cards,” McLaughlin said.
“Although there has been a subsequent rebound in approvals, it remains to be seen whether the government will review the CCCFA rules further to adapt regulations and response to evolving economic circumstances.”
Challenges in the business sector
Shifting focus to the business sector, there has been an increase in company collapses in 2023 compared to 2022, with elevated business credit defaults, particularly in sectors such as property, transportation, and retail facing financial challenges.
The construction sector stands out, with companies being twice as likely to fail (2.2X) than the typical NZ business, contributing to 26% of all company liquidations in the last year. Challenges for credit defaults in the sector, especially for small-sized construction firms, have risen significantly, up by 47% in the last year.
“With the new year in full swing, there are bound to be many resolutions to organise finances and get ahead of the curve,” McLaughlin said. “Now’s the time to take stock of your financial wellbeing and seek advice if you’re feeling the pinch following the summer break.”
Read the full Centrix report here.
To compare with previous results, click here and here.
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