Credit bureau Centrix says mortgage arrears have hit an eight-year high.
In Centrix's latest monthly credit indicator report, managing director Keith McLaughlin says 23,700 home loans are past due, a 6% year-on-year increase.
The Centrix figures are consistent with the latest non-performing loans figures from the Reserve Bank, which showed a $165 million spike in the value of non-performing housing loans in January.
McLaughlin noted that the Reserve Bank (RBNZ) cut the Official Cash Rate (OCR) again in February by 50 basis points to 3.75%, "which has led to several major banks reducing their interest rates as inflation eases".
"While many predict further cuts to the OCR later". While many predict further cuts to the OCR later this year, the economic climate remains challenging for many households and businesses across New Zealand," he said.
"It will be interesting to see how changes to interest rates across the banks impact these [mortgage arrears] figures as the year progresses. Looking at seasonally adjusted mortgage delinquencies, there are signs of early arrears stabilising, but 90+ days arrears are still climbing."
McLaughlin said financial hardships have reached the highest level since June 2020, with 14,700 accounts reported in hardship, a 20% year-on-year increase. Among these, 46% relate to mortgage payments, 30% to credit card debt, and 16% to personal loans.
Looking at consumer arrears, McLaughlin notes a seasonal climb and says these arrears usually peak after the festive and summer season.
"Despite this, arrears are tracking 3% lower year-on-year, marking the first year-on-year improvement since December 2021."
However, in terms of business credit trends, McLaughlin said company defaults rose across all sectors, particularly in construction and transport, with liquidations up by 38% over the past year.
"The North Island saw a 35% increase in liquidations, while the South Island experienced a 67% rise.
"In the professional sector, 204 companies were placed into liquidation, a 45% year-on-year increase, highlighting challenges due to reduced demand for services."
"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," he said.
16 Comments
6% growing faster then house prices Nifty...
The heat map in the link is telling, its the poorer locations around NZ that are behind the most.
Still not seeing this translate into a large amount of mortgagee sales...
I was just going through the mortgagee sales on TradeMe and note that many are in South Auckland, West Auckland, Hamilton and Palmerston North. Some relatively high prices paid in recent years for homes in not the greatest locations. Also some large sections that were likely seen to have development potential.
Not a huge number of listed mortgagee sales although these could represent just the tip of the iceberg as all other efforts to save the situation have failed.
It's a sad situation, exacerbated, no doubt, by loss of employment and difficulties finding new jobs. Financial stress can lead to relationship breakups further exacerbating the situation.
I think some of the motivated vendors are actually stressed banks giving people a chance to exit without mortgagee sale
company defaults rose across all sectors, particularly in construction and transport, with liquidations up by 38% over the past year.
Isn't this the real headline, rather than:
a 6% year-on-year increase in home loans past due
Another solid indicator. We'll documented that SMEs main source of funds is on the back of residential housing loans.
As per the comments in the RBNZ story, still lower than pre-covid, and nowhere near the post GFC levels, which didn't result in a major correction.
This isn't the disaster you are looking for.
Easy to just see the stat and say that. The real question isl wether this just the tip of the iceberg though. Several banking contacts tell me this is a bigger issue.
The tip didn't sink the Titanic and Lehman Brothers.
Ah yes, there's always a boogey man hiding just round the corner.
I've never understood how people expend so much energy finding the next thing to be terrified of.
Not at all. The head in the sand with no lense on outside factors would be the real issue you refer to. #blindedbygreed
Ah, the veiled ad-hom. Nice
What greed Averageman? How am I benefitting from it exactly?
It's a Truely explosive and mega ship sinking ICEBERG.
Those that do not understand this, are not paying attention!
These stressed borrowers are dwarfed by the below water ICE, that ICE is 95% of exposed TIP, of the currently near or at financial default.
Many, many are teetering, with unpayable debts that are exposed like a beached and flapping snapper, burning to death on the black West Coast sands.........
These numbers are those in trouble.... but you are correct we do not have a good grasp of those close to this point, banks will have internal modelling however... they seem to be keen for OCR to drop, a US Equites crash is the last thing NZ Housing needs here.
I wonder if the US still has the Plunge Protection Team, though likely not much use at these high levels, save ammo for the low 5k range. Close below 5827 is bad.
The commenting process is a disaster.. Can it be fixed?
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