Highest home loan arrears since March 2020
Early trends have shown an uptick in consumer arrears for 2024 with 480,000 Kiwis across New Zealand behind in their payments, according to credit report agency Centrix.
However, Keith McLaughlin (pictured above), managing director of Centrix, emphasised that most consumers reporting arrears had only missed one payment and are likely to self-correct.
“Overall, arrears hit a seven-year high – up 9.6% year-on-year – reflecting seasonality following the festive season and summer holiday break,” McLaughlin said.
Last week, the Reserve Bank retained the Official Cash Rate at 5.5% after the first announcement of 2024.
McLaughlin said it’s yet to be seen how this will impact interest rates and how Kiwi households who need to refix their mortgage in 2024 will be affected.
“It’s likely this will add to problems for many households as early trends show the seasonal uptick in consumer arrears in January 2024,” he said.
Following the trend of previous reports, the financial strain skews towards the younger demographics.
McLaughlin said those under 25 years old are more prone to cash flow problems due to likely lower incomes, limited savings and less financial experience.
“We are now starting to see the squeeze flow onto 30- to 40-year-olds, who are likely more financially stable but have perhaps used their buffers,” he said.
Highest home loan arrears since March 2020
The percentage of mortgages in arrears climbed to 1.47% in January 2024, up from 1.40% in December and reaching the highest level reported since pre-COVID.
“This equates to over 21,800 mortgage accounts past due, up 16% year-on-year,” said McLaughlin. “The percentage of vehicle loans in arrears also climbed to 6.0% in January, up 5.0% year-on-year. Credit card arrears also rose to 4.9% – although this remains low compared to historical levels.”
Interestingly, telco/communications arrear have reached a new high of 11.7% as households fall behind on these account repayments. Personal loans and buy-now-pay-later arrears also climbed to 9.9% and 9%, respectively.
Mortgage market warms up
Alongside climbing arrears, demand for credit was also up in February. This was driven by increased interest in credit cards and buy-now-pay-later products.
There was also an uptick in mortgage enquiries, which could point towards a warming of the real estate market in 2024.
“Kiwi businesses saw defaults and liquidations climb overall in January 2024, with retail trade seeing the biggest number of liquidations followed by construction, hospitality and transport,” McLaughlin said.
“We’ve also observed an upswing in mortgage stress for a sole proprietor, with many needing to leverage their home equity to continue funding their businesses – a concerning trend that could spell trouble for these owners in the long term. “
McLaughlin said it was clear the cost-of-living was continuing to impact Kiwi households and businesses across the country.
“We encourage anyone who is feeling the credit crunch to contact creditors to discuss alternative repayment methods,” he said.
“It’s also essential for business owners to credit check new customers before creating commitments to ensure they will get paid.”
To compare with the previous Centrix report, click here.
