Home loan lending down by 30% - Centrix report

The demand for mortgages fell 12% year-on-year in March, while mortgage lending is down 30% year-on-year, a new report has found.

Credit bureau Centrix has released its May Credit Indicator, which analysed credit and lending throughout March. It found as the market tightened and the impact of CCCFA changes lingered, these factors continued to  affect loan conversion rates.

“As interest rates continue to climb, the squeeze is likely to be felt by homeowners and investors alike in the coming months,” said Centrix managing director Keith McLaughlin (pictured above).

McLaughlin said there had been significant reductions in new mortgage lending since the beginning of the year as the housing market retreated, credit tightened and recent rate hikes took hold.

“For example, the value of new residential mortgage lending was down 31% year-on-year in March 2022, while non-mortgage lending was down 11% over the same period,” he said. “Furthermore, loan conversions have dropped across all major credit loan types since the changes to the CCCFA in December.”

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McLaughlin said borrowers were being pushed into longer-term mortgages to keep payments as low as they could, with 57% of new mortgages in 2022 issued with 30-year loan terms.

“Early in 2022, arrears rates for investors and owner occupiers began to rise, which is an early signal of increasing financial hardship and a potential sign of future trouble,” he said.

McLaughlin said inflation and rising living costs were beginning to impact Kiwi credit confidence as overall demand for consumer credit was down 6% year-on-year.

“This is a key indicator of increasing financial strain due to the rise in consumer accounts in arrears,” he said. “While home loan and vehicle arrears are at consistently low levels, arrears on unsecured personal loans have risen to 9% year-on-year, which is their highest level since May 2020.”

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McLaughlin said the volume of arrears was increasing across the board as New Zealanders struggled to make repayments as the cost of living continued to rise.

The April Credit Indicator also addressed average credit scores, which dropped three points during the month of March.

“This is primarily driven by increasing arrears for personal loans, buy-now-pay-later accounts and telco plans. Missed payments on mortgages and vehicle accounts remain low as people are focusing their spend in these areas,” McLaughlin said. “When money gets tight, people are more likely to prioritise these credit payments over personal loans.”