Credit bureau Centrix says the number of overdue accounts dipped slightly in the month of April, but company liquidations were up 19% and company insolvencies an even higher 30%.
Centrix’s May Credit Indicator shows a slight improvement in arrears during April, with the number of overdue consumer accounts decreasing 5,000 to 458,000 from 463,000 in March.
Out of the total 458,000 overdue accounts, 171,000 were more than 30 days overdue, with 116,000 being 60 days or more behind on payments.
The small improvement in overdue accounts was mainly due to reduced vehicle loan and buy now pay later (BNPL) arrears.
According to Centrix’s report, vehicle finance demand is down 20% as new car sales have continued to decline.
Company liquidations rose by 19% year-on-year, with 193 business liquidations recorded in April 2024, compared to 138 in April 2023.
“The manufacturing sector in particular saw 14 companies placed into liquidation in April 2024, the highest monthly total for five years,” Managing director Keith McLaughlin says.
When it came to company insolvencies, there were 203 reported in April 2024, a notable 30% increase from the 156 recorded in the same period the previous year.
Among the insolvencies in April 2024, McLaughlin says 22% were from the construction sector, followed by 17% from the property industry.
Despite the number of overdue accounts dropping by 5,000 in April, consumer arrears still remained 10.5% higher in April compared to April 2023.
McLaughlin says consumer arrears in April were tracking closely to 2018 levels after coming off historic lows. Centrix doesn’t expect this trend to change in the short term.
“Consumers under the age of 25 are among the hardest hit, particularly when looking at credit arrears, as they are more likely to experience cash flow problems and have limited savings to rely on,” he says.
“In contrast, consumers aged 50+ are faring better, with lower levels of arrears since 2020.”
Business credit demand also increased by 12% compared to the same period in 2023, with the hospitality and retail sectors experiencing the most significant rise over the past 12 months.
Mortgage arrears decreased for the second consecutive month this year, but Centrix says they still remain 14% higher than last year.
Currently, 21,700 home loans are reported as past due – down 400 from March – which accounts for 1.45% of all home loans.
“Mortgage applications are also slightly down as borrowers remain cautious in the current flat housing market,” McLaughlin says.
6 Comments
400,000 people employed in New Zealand businesses with between 6 and 19 employees. The majority of those businesses and therefore the jobs they support are secured by loans over property. Their income is derived from your ability and confidence to spend, to consume. Sometimes that consumption will need credit to be extended. How confident can you be that future you can pay for the decisions of current you?
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