But mortgage arrears continue to be a concern
Despite the challenging economic headwinds, there’s been a notable positive movement in New Zealand’s consumer credit landscape, according to Centrix.
Last week’s budget reveal, promising tax cuts from the end of July, has potential implications for consumer spending and credit usage.
“Only time will tell how this will impact the cost-of-living crisis, but there’s no doubt 2024 will remain challenging for some,” said Keith McLaughlin (pictured above), managing director at Centrix.
Arrears showing improvement
Centrix’s latest May Credit Indicator showed a small yet significant improvement in consumer credit arrears in April, with the number of accounts behind on payments decreasing to 458,000, a drop from last month.
This improvement was driven primarily by lower vehicle loan and buy-now-pay-later (BNPL) arrears. However, it's important to note that consumer arrears are still 10.5% higher year-on-year, closely tracking levels last seen in 2018.
“We don’t expect this trend to change in the short term,” McLaughlin said.
Ongoing challenges in mortgage arrears
Despite some improvement, mortgage arrears continue to be a concern, having risen 14% year-on-year.
The number of home loans reported as past due has decreased slightly to 21,700, down 400 from last month, which represents 1.45% of all home loans.
Additionally, the proportion of loans that are 30+ days past due currently stands at 0.71%, up from 0.54% a year ago, indicating ongoing challenges in the housing loan sector.
Subsiding growth in consumer credit
While consumer credit demand has increased by 2.3% from last year, the overall growth rate has slowed in recent months.
Vehicle loan inquiries have fallen sharply by 20% year-on-year, mirroring the ongoing decline in new car sales.
Similarly, non-mortgage new lending has dropped slightly by 1%, also due to reduced new car sales.
Diverging fortunes across age groups
The cost-of-living crisis has not impacted all demographics equally.
Consumers under the age of 25 are among the hardest hit, facing significant credit arrears due to cash flow problems and limited savings.
Conversely, those aged 50 and above have experienced lower levels of arrears since 2020, demonstrating a divide in financial stability across age groups.
Business credit and economic challenges
The business sector is also navigating a challenging economic environment, with credit demand up 12% over the same period in 2023.
However, company liquidations have surged by 19% year-on-year, with the manufacturing sector witnessing 14 companies entering liquidation in April alone—the highest monthly total in five years.
April also saw a sharp rise in company insolvencies, with 203 recorded, marking a significant increase from the previous year, Centrix figures showed.
To compare the latest Centrix figures with the previous results, click here.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
