People pay for their home loans first before their other debts, managing director says
With high inflation and rising interests putting the squeeze on household finances, new figures from Centrix have suggested that more New Zealanders are turning to personal loans to make ends meet.
The latest monthly report from the credit bureau showed the number of personal loans granted in August hitting a 10-month high, eclipsing $500-million-plus in new lending.
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Keith McLaughlin, Centrix managing director, attributed the spike in personal loan demand to households bridging the gap between what they have and what they need, RNZ reported.
“We do tend to find that, particularly in the second- and third-tier finance market, that if the money is required to meet a house commitment or a rental commitment, or a repayment on a car, then [consumers] will go out to bridge that gap,” McLaughlin said. “Whereas, if it’s discretionary spending they will tend to ease back on that.”
The Centrix leader said consumers pay their home loans first, before worrying about their other debts.
Read next: More Kiwis missing regular repayments – Centrix
“Obviously, things that are non-recurring, such as buy-now pay-later transactions or a personal loan – they are generally the first to go into default,” McLaughlin said. “Then it could be a secured loan, like a motor vehicle and generally, the last thing people allow to go into default is their home mortgage or their rent.”
This dynamic was reflected in the data, with the proportion of mortgages in arrears seeing a slight increase at 0.98%, comprising about 14,200 mortgages.
“There’s little sign of mortgage stress emerging, despite the ongoing cost-of-living crisis and geopolitical uncertainty,” McLaughlin said.
New residential mortgage lending was 33% lower compared to the previous year, reflecting the slowdown in the housing market.
The August report also revealed an increasing number of accounts in arrears for consumer lending products, car loans, buy-now pay-later (BNPL), and missed energy payments.
Arrears in consumer lending products were up 8% from a year ago. For car loans, arrears rose for the fifth month running to 4.8%, which is the highest level in nearly two years. BNPL reached a three-year high of 9.3% and missed energy payments rose to 4.2%, although both were still below historic levels, RNZ reported.
