Hard times not easing much for mortgage borrowers

• Tweet

Mortgage arrears have risen for the third consecutive month and are higher than last year's levels, according to figures from the credit bureau Centrix.

Tuesday, December 3rd 2024, 9:07AM 1 Comment

More than 21,300 home loans were past due, or 1.42% of the active credit population, in October.

While these figures are still historically low, they are 10% higher than in October last year.

The number of financial hardship cases rose by 20% year on year. Of these, 46% relate to mortgage difficulties, 30% to credit card debt, and 15% to personal loan repayments.

Although the overall rate of growth in hardship cases is easing, Centrix managing director Keith McLaughlin states that they are still significantly higher than last year.

He notes that this aligns with recent reports of record KiwiSaver withdrawals in October due to financial hardship.

IRD figures show that $38.3 million was withdrawn from KiwiSaver accounts in October — the highest on record.

For consumers in general, tough times persist. The number of people behind on their payments rose to 461,000 in October, up by 3,000 month-on-month, or 12.14% of the active credit population.

Consumer credit defaults have risen by 37% over the past year, compared to the year before, a trend attributed to the cost-of-living crisis.

Meanwhile, Reserve Bank figures show that non-performing home loans rose by $88 million, or 4.4%, to $2.1 billion in October. This marks the first rise in three months.

The amount of non-performing housing loans now represents 0.6% of banks' total mortgage stock, which amounts to $360.58 billion. This figure is up from 0.4% in October last year.

Banks' mortgage lending stock increased by $1.58 billion in October, the biggest increase since December 2021 when it rose by $2.049 billion.

Investors have now re-entered the market, with their total mortgage stock growing by $2.155 billion so far this year. Last year, their mortgage pile increased by just $345 million as they waited for interest rates to drop, lending restrictions to ease, and changes to the Brightline test and tax deductibility.

McLaughlin expects further rises in arrears over the summer.

Over the past two years, mortgage arrears have risen significantly, increasing from 1.29% in October last year to 1.47% in January this year.

He advises borrowers already behind on payments to plan ahead effectively.

Although the country’s economic trajectory is looking promising, McLaughlin says that when analyzing consumer and business insights, a more challenging picture emerges.

This is illustrated by a 27% rise in business liquidations in the year to October.

Liquidations in the first 10 months of this year have already surpassed the total for last year.

In October, 233 businesses were put into liquidation, down from 306 in September.

Residential building companies, property operators, and hospitality businesses have been the most affected.

Business credit defaults are also up by 16% year on year across the board, with construction at 38% and transport at 35%. The average default is now almost $8,000.

Tags: Centrix

Comments from our readers

Sign In to add your comment