Borrowers behind in mortgage payments ebbing

As the country crawls out of recession, mortgage arrears have dropped slightly.

A total of 23,000 mortgages are past due, or 1.55% of the active population, This is 400 fewer than January, the latest data from credit bureau Centrix show.

The annual rate of growth in mortgage arrears has eased in recent months, indicating early arrears have now stablished, Keith McLaughlin, Centrix managing director says.

New mortgage lending rose 22% year-on-year but remains 18% lower than the same time in 2021, during the property market boom. Lower interest rates have contributed to increased market activity.

This wave of activity is illustrated by property website realestate.co.nz having 36,870 properties available for sale at the end of March – the most in any month of the year since April 2015.

It is up 10.9% compared to the end of March last year, and 25.9% higher than March 2023. 

It also means the number of homes available for sale has almost doubled (+90%) since March 2021 when the market was booming.

Mortgage applications for new homes rose 13% year-on-year in February.

McLaughlin says consumer confidence is slowly recovering, with credit card demand continuing to improve alongside retail energy and personal loans, sitting at +22%, +16.7%, and +1.1% respectively.

McLaughlin says green shoots of optimism can be observed as the number of total consumer arrears is down 11,000 month-on-month, indicating signs of gradual credit cycle recovery.

Non-mortgage lending, including credit cards, vehicle and personal loans, BNPL and overdrafts, is up 3.9% in the February quarter compared to the same period last year, driven primarily by increased household spending over the summer period.

Overall, new household lending increased by 20.2% year-on-year.

McLaughlin says green shoots of optimism can be observed as the number of total consumer arrears is down 11,000 month-on-month, indicating signs of gradual credit cycle recovery. While there are still 480,000 consumers in arrears, levels are 1% lower year on year – the second consecutive month this has been the case.

Although financial hardship cases fell in February with the rate of increase easing overall, they remain up 16% year-on-year.

“While this shows the current economic climate is continuing to bite, it is positive to see individuals taking proactive steps to front-foot financial hardship with lenders,” McLaughlin says. 

In the business sector, credit defaults rose 18% year-on-year across all sectors, whilst credit demand is up 6% across the board.

Company liquidations are up 37% year-on-year, and 23% month-on-month, with with 236 liquidations in February compared with 192 in the same month last year, Centrix said.

The construction sector accounted for 31% of insolvencies, followed by hospitality (12%) and property (10%).

Liquidations are up 20% year-on-year in the agriculture sector; however, signs of recovery are emerging with growers, dairy and livestock farmers seeing positive trends in recent months as strengthening export returns support national economic recovery.