Centrix monthly credit report highlights a rise in the number of people missing consumer debt payments for 3 straight months & more than 100 construction company liquidations so far in 2022

The number of people missing consumer debt payments rose for the third straight month in May, with the number of people behind on payments up almost 12% year-on-year, credit bureau Centrix says.

In its June Credit Indicator Centrix also says more than 100 construction companies have been placed into liquidation in 2022, with defaults up 10% compared to the same time in 2021.

However, overall Centrix's June report paints something of a mixed picture. It says 8,750 consumer borrower accounts were in hardship in May, the lowest number since December 2019, and at 1%, the proportion of home loans with missed payments remained low.

But, as the economy tightens, it expects more households will struggle to pay all their bills. 

"Across May the number of people missing repayments rose for the third month in a row, which runs contrary to the seasonal trend that’s typical this time of year. The total number of people who are behind on payments is up 11.7% compared to the same time last year, indicating some consumers are starting to experience financial strain," says Centrix Managing Director Keith McLaughlin.

Centrix says enquiries for buy now pay later (BNPL) and new credit card demand fell in May, down 32% and 22% year-on-year respectively. New residential mortgage lending was down 34% from the low interest rate driven flurry of a year ago, but is just 4% down on the pre-Covid world of May 2019, suggesting a return to pre-pandemic levels, Centrix says. 

With amendments to the Credit Contract and Consumer Finance Act (CCCFA) designed to fix complaints the lending industry raised about previous changes kicking in on July 7, Centrix suggests it'll be interesting to see if these changes buoy lending.

Separately McLaughlin says construction companies are facing significant challenges as material shortages, rising costs, and the housing market downturn combine to pressure the sector.

"More than 100 construction companies have been placed into liquidation so far this year and defaults are up 10% compared to same time in 2021. Across the country, 25% of all company liquidations in May were from the construction sector. Credit scores for the sector are also plunging. The average credit score for new credit applications across the sector is down 8 points, as the potential risk of default increases across the sector," McLaughlin says.

Despite toughen times in the construction sector, Centrix says overall there were low company closure and liquidation rates demonstrating a level of resilience in the economy.

"Closures were down 37% in this quarter, compared to the previous quarter, and company liquidations were also down 14% year-on-year. However, company credit defaults are beginning to increase, specifically in the building and hospitality sectors, as they have experienced the highest default rates since the final quarter of 2019."

"Similarly, credit demand in the hospitality sector fell sharply at 21% year-on-year, and agriculture credit demand is down 24% year-on-year," McLaughlin says.