An increased volume of personal loan applications suggests Kiwis are increasingly turning to debt to fund spending, Centrix says.
The credit bureau's October Credit Indicator shows the value of new consumer loans granted during September this year was 18% higher than in September 2021.
"The economic climate remains challenging for many Kiwis as they continue to adjust to the impacts of inflation and the rising cost of living. The Reserve Bank raised the Official Cash Rate for the fifth time in a row to 3.5%, the highest level in over seven years, and interest rates are continuing to climb," Centrix Managing Director Keith McLaughlin says.
"Alongside this, Statistics NZ recently reported the cost of living for the average Kiwi household increased by 7.7% in the September 2022 quarter. This squeeze is being reflected in borrowing, as consumer credit demand has started to climb again to pre-pandemic levels, with personal loans on the rise as Kiwis turn to credit to support their spending."
Centrix says in September 10.6% of active borrowers were behind on repayments, up 2% year-on-year. Some 4% are currently 30+ days past due, and 2.3% are 90 plus days past due. These figures remain unchanged month-on-month.
Mortgage applications and lending are trending down as the housing market continues to weaken. Applications for mortgages were down 11% year-on-year. New mortgage borrowing was down 37%.
However, mortgage arrears have edged above 1.0% for the first time in six months, with 14,600 mortgage accounts past due. Despite this Centrix sees no sign of widespread mortgage stress.
Arrears on vehicle loans have improved to 4.5% this month, down from 4.8% the month prior, after rising for the past five months. Arrears on unsecured personal loans dipped to 7.6% from 7.7%, Centrix says.
Credit card arrears remain at record low levels of 3.9%, which has been achieved three times this year so far in June, August and September.
New credit card applications rose 3% year-on-year, while buy now pay later enquiries fell 25%, Centrix says.
The number of Kiwis with active credit card accounts is down 33% since 2019 and the average credit score is 824. A credit score is a number between one and 1000 indicating how likely you are to pay your bills on time.
There are nearly 2.1 million New Zealanders who have an active credit card, with 650,000 borrowers with multiple credit cards in their wallet. The average credit limit on active cards in New Zealand is $7,600, Centrix says.
The average business credit score for new applications is down to 756. This has been steadily declining during the last six months, down from a high of 779 in April.
"The hospitality and construction sectors in particular are feeling the crunch at the moment. Both sectors have seen an upswing in defaults due to supply chain issues and the overall slowdown in consumer spending. Overall increases in costs are becoming difficult to pass on to customers who are far more aware of their expenses at the moment, making the ongoing impacts of inflation that much harder for Kiwi business owners," says McLaughlin.
Meanwhile, the number of households behind on utility bills has improved, falling to 3.3% of accounts in September down from 3.6%.
25 Comments
"However, mortgage arrears have edged above 1.0% for the first time in six months, with 14,600 mortgage accounts past due."
Thats another nail in the coffin. Is there actually any room for the Corpse ???
wait until the 57% (ANZ not sure on other banks) that have a rate that starts with a 2 or 3 move to the rate that starts with a 6 or 7....carnage I suspect
or move to the 8 9 and 10.
It really is interesting; all the signs are there for a complete and utter economic catastrophe that will make 2008 look like a minor speedbump. Yet somehow everything and everyone just keeps on merrily staggering along.
Surely the annual Christmas debt hangover will be the final straw to break the camel's back.
I guess no one cares or is worried because they know what government did during Covid. Government splurged large and gave away free money to everyone. So everyone believes that they will be anyway helped with more free money is if turns to custard. So why worry and spend like a trooper like there is no tomorrow.
This is animal psychology one on one, once you start feeding the animal, they forget how do hunt.
The government & the RBNZ in tandem embarked on a policy of encouraging NZrs to borrow to spend to save the economy. Now NZrs are having to borrow to save themselves and families. An escalating indictment that will swamp any good that this government might claim it has achieved.
As others have pointed out on here, Ireland's bubble pop was significant but also started off even slower than the reductions here in NZ. So...never know what's going to happen, I guess.
I was in Ireland in 2008. The wider economic and social issues were pretty quick to present themselves. Our company (and many others) shed about 80% of staff in the space of two weeks. It just took a while before all those issues flowed through to housing prices.
Based on my experience there, residential housing prices are the least of our worries. Hence why I am surprised at the complete absence of change in people's day to day lives.
Interesting perspective, thanks.
Seeing it play out in real time was an eye opener.
The construction industry disappeared almost overnight. Walking to work you could hear the hum of cranes and diggers that had been left running as the operators just abandoned them once they were told they weren't getting paid.
I think the immunity that our 'Rock star economy' gave us around the time of the GFC has blinded many to what can happen.
NZ really didn't get impacted by the GFC. A few shares had some issues, and exports were a bit rocky for some, but on the whole, we were relatively insulated from the European/US bank collapses, and resultant chaos.
This time we are up to our necks in filth. However, unlike the US we do not have non-recourse loans. So, it won't be the banks taking the haircut. It will be the wider populace. How that impacts the social/cultural fabric of NZ will be very interesting.... hope for the best, prepare for the worst.
And so it begins. I wonder if we will see any decrease in xmas retail spending, and if no change, then surely we'll see a correlating hike in credit applications.
Also
"Overall increases in costs are becoming difficult to pass on to customers who are far more aware of their expenses at the moment, making the ongoing impacts of inflation that much harder for Kiwi business owners"
The private construction gravy train is slowing to a halt as kiwis vote with their wallets, soon if not now, if one builder won't do it for a lower price, another surely will.
"The credit bureau's October Credit Indicator shows the value of new consumer loans granted during September this year was 18% higher than in September 2021."
I wonder what it was compared to pre-covid times?
We are definitely inside the cusp of tremendous & traumatic changes happening all around us.
After 60 years of trying the educated elites now have control of everything they need to rule - education, media & state. For ones so 'enlightened' their MO is remarkably simple - ''We know, we say, you do.'' as someone here posted recently. It will be a fascinating watch next week as the mid-terms play out in America. Already Brazil has torn itself apart, with Denmark the next cab off the rank. Sweden, everybody's favourite social democratic state, has a right of centre govt for the first time in more than 20 years, as has Italy, but from where I sit, no one seems to have any real answers for our malaise.
Democracy is in danger, that much we do know. Socialism is rife within it (our own culture) driven by those elites who think they know best. It would be good if they did, but they don't. You only have to look at the collapse of law & order & its partner rising crime, to see that. The elites are far too busy with the climate emergency to focus on little things like ram raids & the huge numbers of ghost children, those kids who don't go to school anymore. A new covid bred criminal class.
Global debt is unsustainable & impossible to repay. The banks had better have lots of room in their provisions for bad debts on their balance sheets, otherwise they too will come under pressure. And when the banks start feeling the pressure, then we're in a real recession.
All socialism's fault for more kids wagging school and increased crime happening?
Aren't government provided schooling and police force effectively socialism in themselves? Ie the government raising taxes from the productive enterprise and spending it on services which provide a social good.
If that is the case, it sound's to me like we don't have enough socialism.
the trouble with socialism is eventually you run out of other people's money to spend - Margaret Thatcher.
your point is valid if, and only if, 100% of taxation was profitably spent. sadly that is not going to happen. special interests and pet projects abound and because it's someone else's money there is no accountability or consequences for waste.
Appropriate username.
The staggering irony when older folk - who received free education and debt-free entry to work, cheap housing thanks to previous generations' taxes and work, a capitalised universal family benefit and cheap housing corp loans, and a universal pension benefit - rant about "socialism" when today's young receive none of those things yet pay the taxes that fund the oldies' universal benefit.
Surely there should be some self-awareness, some appreciation of the fact that more valuable wages and less valuable assets made society more stable and folk more able to build a life, and that reversing these - while it's enriched some of the older folk who got in cheap - is undermining the ability of many to participate in capitalism, and is worsening social outcomes.
We have far less "socialism" than in those previous decades.
After 60 years of trying the educated elites now have control of everything they need to rule - education, media & state.
I always find statements like this rather curious. It's not clear what 'in control of' means in this context - the majority of workers in a sector ? Running the sector? But it seems unsurprising - and uncontroversial to me - that educated people should be in control of the education system. Similarly, it's probably true that the vast majority of journalists have a tertiary education, because it's a lot more difficult than it used to be to get a job in journalism without one. In terms of politics, again it seems unsurprising that lots of politicians are tertiary educated - it's likely always been the case that politicians are more likely to be more educated than the general population, and the general population in NZ is already pretty well educated - 65 percent of the population has a tertiary education.
In some ways I agree that this is a bad thing, because I suspect a lot of the growth is just credentialism - i.e., people who are not particularly interested in tertiary education having to get a degree in order to get a job that in the past a school leaver would have been able to get (journalism is a great example). But there seems to be a bit of inverse snobbery in the comment above. I know bugger all about plumbing, so I'm perfectly happy for a trained plumber to tell me what to do when it comes to plumbing. Why is it somehow different with things that require a university education?
The RBNZ did some modelling and determined that if interest rates hit 7%, 4 out of 7 FHBs would be in serious financial stress. Floating rates are 7.25%. And the RBNZ has indicated two .75 basis point increases between now and early 2023. How's that going to work?
Interesting, do you know what period of FHBs it covers i.e. when they bought?
The government stated that “the goal of the interest deductibility changes for property investors was to support more sustainable house prices and to improve affordability for first-home buyers.”
It does not look like their plan has worked.
One day they will wake up and realise their policies have hurt renters (ie where most First Home Buyers start out).
Increased rents, means FHBs can’t afford to save for deposits; increased inflation means FHBs can’t afford the mortgage.
An increased volume of personal loan applications suggests Kiwis are increasingly turning to debt to fund spending, Centrix says.
Another view would be these people are just trying to survive.
Taking on a personal loan comes with an even higher interest rate.
Some of us may be eating mince for a while yet.
Isn't mince pricey these days?
The majority of people likely think that the government will step in and save them. We are locked into being reliant on consumerism, it's all we do really, so they probably have some justification for thinking this. To be honest I am as fearful of major government intervention as I am of no intervention. I don't really have much confidence in them.
This whole consumer society could just collapse like a house of cards. I mean we know that many live a paycheck to paycheck precarious financial existence. Others have very high debts and lavish lifestyles.
I'm wondering about those that live off their revolving credit too. How will that work out in the long run? Will the banks be happy to see these accounts being drawn from more and more. I doubt it will be easy to increase the credit limit now.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.