Mortgage growth defies challenges
Amidst recent legislative changes and economic uncertainties, New Zealand’s mortgage sector is demonstrating notable resilience, according to Centrix.
Centrix’s April Credit Indicator provided a comprehensive overview of current trends affecting mortgage lending, highlighting both challenges and growth in the sector.
Following the announcement of reforms to the Credit Contracts and Consumer Finance Act (CCCFA) by Minister Andrew Bayley, there has been a noticeable impact on credit behaviour across New Zealand.
Read about the CCFA reforms and industry feedback on the changes.
The overall demand for credit among Kiwi consumers rose by 3.5% year-on-year in April 2024, with a significant uptick in sectors such as Buy Now Pay Later (BNPL), retail energy, and credit cards.
Mortgage lending on the rise
The mortgage sector, in particular, has shown encouraging signs of growth.
“Mortgage lending is showing increasing signs of growth, tracking 6% higher year-on-year in the first quarter of 2024, buoyed by more stock being available on the market,” said Keith McLaughlin (pictured above), managing director at Centrix. “This could be another sign the real estate sector is beginning to rebound, although only time will tell if this is a trend rather than a blip.”
Consumer credit challenges
Despite the positive trends in mortgage lending, other areas such as auto loans have seen a decrease, which could be attributed to the recent introduction of road user charges and the removal of the Clean Car Discount for electric vehicles.
Overall, consumer arrears remain elevated, with 12.7% of the active credit population behind on at least one of their repayment obligations. That’s 463,000 Kiwi consumers behind on their credit repayments, up by 6,000 from the prior month.
“However, it’s important to remember that by far the majority of these have only missed one payment and are likely to self-correct,” McLaughlin said.
Financial hardships and mortgage arrears
Financial hardships continued to be a significant concern, with reports on the rise since November 2022. Currently, there are 12,900 accounts reported in financial hardship, marking an increase of 400 from the previous month.
Of the figure, 44% relate to difficulties in mortgage payments. Fortunately, there has been a slight improvement in mortgage arrears, which have decreased to 1.48% in March, down from 1.51% in February. Currently, there are 22,100 mortgage accounts that are past due, a decrease of 500 from last month but still representing a 13% increase year-on-year.
Challenges in business
Business credit demand has grown by 7% in the past year, driven largely by the hospitality and retail sectors. These businesses are seeking better pricing and trade terms to effectively manage their cash flow amidst ongoing economic challenges.
Credit defaults are high, and company liquidations have reached a nine-year peak, with 230-plus companies liquidated in March – the highest in a month since March 2015. The construction sector is particularly hard hit, accounting for a quarter of these liquidations, as financial strains delay housing projects, Centrix reported.
Compare the latest figures with the previous Centrix data.
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