Although the number of New Zealanders behind on debt repayments is increasing, it's still behind historic levels, data from credit bureau Centrix shows.
According to Centrix's latest monthly Credit Indicator report, the number of people behind on debt repayments increased to 11.3% of the active credit population, or 410,000 people, in December. That's up from 400,000 in October and is a 10% increase year-on-year as cost of living pressures bite. At 11.3%, it's the highest portion of borrowers since 11.4% in February 2020 just before the Covid-19 pandemic kicked-off and large quantities of public money started sloshing around the economy.
"Although the rise in arrears is concerning, overall arrears rates are still low compared to historic levels," Centrix says.
In terms of regions, it says Gisborne has the highest overall arrears rate at 14.7%, and Northland has the highest proportion of mortgage borrowers past due at 2.4%.
Centrix highlights a rise in car loan arrears as evidence of increasing financial pressure, noting these are usually one of the last credit repayments people let slip.
"As a key indicator of financial pressure, the rise in vehicles arrears is concerning - up 5.3% in December, the highest recorded since June 2020 (6.2%)," Centrix says.
"The number of home loans with missed repayments has also crept up to 1.17% in December, the largest proportion since April 2021 (1.23%). There are currently 17,200 mortgage accounts
past due."
20 Comments
On the business side, my debtor days are pushing out noticeably now. I'd say I've gone from 80% of invoices being paid on time, 15% being paid slow (within 2 weeks past due date) and the last 5% taking much chasing to around 60% being paid on time, 30% being slow and 10% being very behind or potentially unrecoverable.
Was talking to another business owner the other day (who runs a decent-sized firm that sends out a lot of invoices) and he was complaining of the same.
Good advice, thanks.
My lawyer has generally done a good job at recovering slow receivables in the past, and if I look back over the past five or so years in business there's only been a handful of unrecoverable invoices.
But yes I can't afford I become a bank for my clients, and being firm on getting paid on time is going to be a big focus for me this year.
Reality starting to hit. Big tax time for businesses on the back of holiday pay at Xmas. Aka a double cash hit. Inflation still far from being suppressed, and that only means one thing on 23rd Feb. Another decent rate increase.
Do the math...before your bank does.
The graphs clearly show there isn't a problem (maybe yet). The consumer arrears are lower throughout 2022 compared to pre Covid 2019.
Home loan arrears at 1.17% are lower now, than any time before Covid, range 1.28%-1.55%.
Same for auto loans, lower arrears in Dec 2022, than any time before Covid!
Worth remembering that the pre-covid repayments were at significantly lower rates and on significantly lower sums (remember the mantra from Orr and co, ‘spend spend spend everyone - save the economy from recession’!)
This means the potential for these trends to accelerate rapidly is alarmingly real.
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