People batten down the hatches in tough environment – Centrix

New information shows borrowers being ultra careful and bracing for trouble as economic conditions get tougher.

Tuesday, November 1st 2022, 8:00AM

But they are avoiding getting into difficulty by borrowing less and paying the debts they owe as a top priority.

By doing this, they are managing to cope with high inflation, interest-rate pressure and the possibility of a recession coming over the horizon.

This is the inference from the latest monthly report by the credit reporting agency Centrix.

In one key finding, Centrix said mortgage lending was continuing to head downwards.

Applications for mortgages were down 11%, and actual new mortgage borrowing was down 37%, both year on year.

But if fewer people were taking out mortgages, people who did owe money were coping with the pressure. In September, 10.6% of the active credit population were behind on repayments, and this was 2% up in a year.

But on a monthly basis, there was very little change. And while mortgage arrears had edged up slightly, with 14,600 mortgage accounts having overdue payments, this was a small share of the total mortgage-holding population and Centrix said there was no sign of widespread mortgage stress.

Other branches of the lending industry also told a mixed story.

Arrears on vehicle loans actually improved slightly after getting worse for the previous five months, while arrears on unsecured personal loans also edged down.

And there were other positive developments. Arrears on Buy Now Pay Later (BNPL) schemes fell back slightly and in a further positive trend, more people were paying their energy bills on time.

Centrix said there were nearly 2.1 million New Zealanders who had an active credit card, with 650,000 borrowers having multiple credit cards in their wallet.

However, they were becoming fewer as people shut down their surplus credit cards and paid off their debts. Of the credit cards that remained, the average credit limit was $7,600.

The situation for business loans was complex. Demand for business loans was down across several sectors, including the retail trade, property and healthcare.

In particular, hospitality was hard hit by cost pressures and staff shortages, which resulted in rising defaults.

Tags: Centrix