Mortgage applications drop 25%

Mortgage applications are down 25% year-on-year, which suggests people are putting real estate plans on hold in favour of balancing their finances.

New residential mortgage lending is down 40% year-on-year. Meanwhile, arrears and missed home loan payments remain under 0.1% as New Zealanders prioritise keeping on top of their mortgage repayments.

Credit bureau Centrix has released its August Credit Indicator, which has revealed Kiwis are reigning in their finances when it comes to their spending habits.

“While there are currently more than 14,000 mortgage accounts past due, there are no major signs of mortgage stress emerging despite the recent rate hikes and higher costs of living,” said Centrix managing director Keith McLaughlin (pictured above). “However, arrears on vehicle loans have risen again for the fourth consecutive month to 4.5%, the highest reported level since early 2021.”

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McLaughlin said the average mortgage loan for first-home buyers increased by 64% during the three-year period from 2019 to 2021, peaking at $600,000 in January.

“However, this figure has fallen by $65,000 in the last six months – an 11% drop aligned with the cooling of the property market and falling house prices,” he said. “The average credit score for first-home buyers is a strong 804, with these consumers showing lower levels of missed payments across all their borrowing commitments.”

McLaughlin said despite the efforts from the Reserve Bank increasing the official cash rate and early signs of inflation receding, Kiwis were still feeling the pinch from high living costs, increased interest rates and the squeeze of the economic climate.

“The simultaneous increase in demand for credit and arrears points to people being under pressure to meet repayment obligations,” he said. “Overall arrears went up for all regions across the country, with consumer arrears increasing 13% year-on-year in July.”

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McLaughlin said consumer arrears were on the rise, up 13% year-on-year as the economy tightened.

“Overall arrears went up for all regions across the country, with 4.2% of credit active consumers currently 30+ days past due and 2.4% 90+ days past due,” he said.  “Gisborne has the highest overall arrears (14.4%) while Northland has the highest proportion of mortgage borrowers past due (1.9%).”

McLaughlin said while arrears on unsecured personal loans edged up to 7.9% year-on-year, vehicle arrears rose for the fourth consecutive month.

“Vehicle repayments are traditionally one of the last repayment obligations people let slip and the ongoing growth in arrears may indicate underlying pressure for Kiwi households,” he said.

“Meanwhile, personal loan demand is up 29% year-on-year and credit demand was up 23% year-on-year. Personal loans are traditionally used for funding things like holidays, or this could be a sign Kiwis are turning to credit to help cover the rising cost of living and to meet their wider repayment obligations.”