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Difficulties with debt on the rise – Centrix

Stressful economic conditions are starting to show up in people's exposure to unpaid debt, according to the credit reporting agency, Centrix.

Tuesday, September 13th 2022, 2:58PM 1 Comment

by Eric Frykberg

It says high living costs, increased interest rates and the squeeze of a tough economic climate have made it hard for people to meet repayment obligations, right across the country.

Centrix reveals debt information every month, and its latest report lists some significant developments. It shows arrears in consumer debt rose 13% in the year to July, while arrears on unsecured personal loans rose 7.9%.

There were also rises in arrears for Buy Now Pay Later deals along with an increased number of credit card payments that have slipped past their due date.

Vehicle arrears also rose for the fourth consecutive month, which Centrix says is significant, since vehicles are generally among the last debt-financed purchases that people default on.

Centrix says mortgage arrears seem to have escaped this trend, since people are generally even more careful about keeping a roof over their heads than in retaining their vehicle.

However, they are not taking out so many home loans in the first place: mortgage applications for first homes are down 25% year on year.

Those who do take out mortgages for a first home are borrowing less: average mortgages have fallen by $65,000 in the past six months. That is down from a peak average mortgage of $600,000 in January this year.

The commercial sector is also having it tough, says Centrix.

“The Kiwi business sector continues to walk the economic tightrope of remaining open and viable while contending with supply chain issues, labour shortages and reduced consumer spending,” Centrix writes.

“The retail and construction sectors in particular are challenged by defaults and lower activity, while tourism and hospitality show increased activity and lower defaults as international tourists return in greater numbers.”

Centrix says managing repayments on debt is paramount, and it urges debtors to speak with lenders proactively to reorganise repayment terms if they are facing difficulties.

“An adjustment of lending terms is far preferable to letting debt build and potentially endanger long-term financial wellbeing.”

Tags: Centrix

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Comments from our readers

On 14 September 2022 at 10:17 am Dirty Harry said:
Report is here
https://www.centrix.co.nz/wp-content/uploads/2022/09/Centrix-August-2022-Credit-Indicator-Report.pdf

What it says is:
However, mortgage arrears remain low as Kiwis prioritise keeping a roof above their heads while arrears on
discretionary repayments like Buy Now Pay Later accounts, credit cards and personal loans climb.
Following the market trend, mortgage applications are also down 25% year-on-year, which suggests people are putting
real estate plans on hold in lieu of balancing their finances. Meanwhile for those who are borrowing, new residential
mortgage lending is down 40% year-on-year in July 2022.
Despite this, first home buyers who successfully purchase property will find the average mortgage loan has fallen by
$65,000 in the last six months – an 11% drop aligning with the cooling of the property market and falling house prices.

What this data actually shows is that BNPL, consumer credit and loan sharks (the ones now squealing about how unfair it is that the banks might get "special treatment" in the review) were, are, and will continue to be the real problem.

Simultaneously consumer debt arrears is up 13% while demand for personal loans is up 29%.

The arrears rates on personal credit runs about 8X mortgage arrears - 12% vs 1.5%. The former rising, the latter static.

Mortgages never were the problem, and are not likely to be; and should never have been caught in the CCCFA changes.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

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