Mortgage arrears up 34% year on year
The number increases to 15,000 in June, Centrix affirms.
According to a recent report from Centrix, the amount of individuals who are falling behind on their loan payments has surpassed the levels seen in 2019.
As outlined in the recent Centrix June Credit Indicator report, there has been a 4% increase in consumer delinquencies compared to the same time last year. This means that 426,000 New Zealanders are currently experiencing difficulties in making their loan payments, which represents a rise of 15,000 individuals in just one month.
According to Centrix, a considerable portion of individuals with active credit accounts have fallen behind on their payments. Specifically, around 11.7% of the credit population is facing this issue. Moreover, there are alarming rates of arrears in two types of credit accounts. Unsecured personal loans are experiencing a double-digit arrears rate of 10%, while buy now pay later accounts have a slightly higher rate of 10.4%.
The number of people falling behind on their mortgage payments has risen by 1.32%. Approximately 19,500 households are currently facing mortgage delinquency, which is a 34% increase compared to the previous year. These figures signify the highest level of delinquencies observed since the onset of the COVID-19 pandemic in March 2020, as stated by the credit agency.
The data for June shows a reversal from the May statistics presented by Centrix. In May, the number of mortgages in arrears decreased to 19,000.
Keith McLaughlin, the managing director of Centrix (shown in the picture above), informed NZ Adviser that delinquencies often increased during the holiday season and began to decline in the midst of the year.
"The situation has changed direction – there's been an increase – and that's worrying," McLaughlin expressed.
McLaughlin expressed that borrowers were still worried about the consequences of increasing interest rates and the unpredictability surrounding living expenses.
According to the opinions circulating in the market, indicating that interest rates are getting closer to reaching the highest point, McLaughlin expressed his anticipation that borrowers would feel more assured about the stabilization of interest rates by the conclusion of the third quarter.
"The issue of the cost of living still persists… I don't foresee any decrease in the [unpaid debts] until late September or early October," he expressed.
According to McLaughlin, he anticipates that borrowers will become more mindful in the near future about the eventual cost of living, enabling them to make appropriate plans.
"Spending on non-essential items might begin to rise, hence boosting consumer faith... I reckon the issue lies in the lack of certainty," he stated.
According to McLaughlin, households can be broadly categorized into two groups: those who recently purchased property and took on a substantial amount of debt, and those who have owned property for a longer period of time and have either fully paid off or significantly reduced their mortgage. The former group will continue to experience financial strain, while the latter group is not affected to the same degree.
27% Drop In New Mortgage Lending
The June statistics from Centrix revealed a decrease of 27% in fresh mortgage loans compared to the previous year, indicating a decline in the real estate market.
Centrix reported that the demand for mortgage activity was low, as there was a 3.4% decrease in application enquiries compared to the previous year.
Centrix reported a substantial increase of 10% in non-mortgage lending compared to the previous year. This growth was primarily fueled by the impressive expansion in vehicle loan financing.
Apart from consumer loans and home mortgages, there was a noticeable increase in the number of credit defaults in the corporate industry, with a significant rise of 35% in the total number of company liquidations compared to the previous year.
Centrix reported an noticeable increase in credit defaults spanning multiple industries, such as the real estate/rental sector, hospitality, retail commerce, and construction.
According to the latest statistics released in June, the percentage of unpaid vehicle loans has increased to 5.7%, marking a significant 31% surge compared to the previous year. In contrast, the amount of overdue credit card payments has decreased to 4.5%, albeit slightly above the corresponding figures from last year.
In addition to mortgages and personal loans, there was an increase in demand for nearly all credit products, as reported by Centrix. The credit agency pointed out that the demand for financing new vehicles remained strong, with inquiries showing a 17% growth compared to the previous year.
As a mortgage consultant, do you notice an uptick in financial strain related to mortgages among your clients? Feel free to express your opinions in the comment section located beneath.
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