Consumer credit defaults have increased by 42 percent on the year earlier. Photo: RNZ / Michelle Tiang
The number of people falling behind in mortgage payments has hit levels not seen since 2017, according to credit agency Centrix.
Its January credit report indicates mortgage arrears were at an eight-year high, with personal loans, buy-now-pay-later (BNPL), retail energy and telco arrears on the rise.
Consumer credit defaults also increased by 42 percent on the year earlier, while personal insolvencies showed signs of an uptick, but remained below historical levels.
Financial hardship cases reached the highest level in five years, at 14,700 accounts, though arrears were 3 percent down over the year earlier - the first year-on-year improvement since December 2021.
But hardships were still up 20 percent on the year earlier, with 46 percent related to mortgage payments, 30 percent to credit card debt and 16 percent to personal loans.
Consumer and personal loans arrears rose 9.7 percent in January, and BNPL arrears increased by 8.6 percent, month on month, though were down on the year earlier.
Retail energy payment arrears rose to 5.2 percent month-on-month or by 6 percent on the year earlier, while telco arrears rose nearly 11 percent.
Mortgage arrears reached an eight-year high, with 23,700 home loans past due - a 6 percent year-on-year increase.
"It will be interesting to see how changes to interest rates across the banks impact these figures as the year progresses," Centrix managing director Keith McLaughlin said, noting the recent drop in the Reserve Bank's official cash rate to 3.75 percent, as well as forecast for further rate cuts this year.
Demand for credit steady
Despite the increasing debt, demand for consumer credit remained stable, with a slight 0.5 percent drop on the year to date.
Mortgage applications increased by 11 percent, with new mortgage lending up 18 percent.
New mortgage lending grew 4.3 percent, while credit card demand rose by 24 percent year-on-year.
Overall, new household lending rose by 16.5 percent year-on-year.
Business credit trends
Company defaults rose across all sectors, particularly in construction and transport, with liquidations up 38 percent over the past year, mostly as a result of actions brought by Inland Revenue to recover unpaid taxes.
"In the professional sector, 204 companies were placed into liquidation, a 45 percent year-on-year increase, highlighting challenges due to reduced demand for services," McLaughlin said.
"It's important for business owners to make sure their financial house is in order, especially as economy remains uncertain for the remainder of the year."
The North Island saw a 35 percent increase in liquidations, while the South Island experienced a 67 percent rise.
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