New credit data suggests another challenging festive season ahead for many Kiwis, with mortgage and consumer arrears remaining high, according to Centrix. 

And with seasonal trends pointing to further rises in arrears over summer, Centrix managing director Keith McLaughlin is cautioning borrowers behind on their payments to plan effectively ahead. 

“Although New Zealand’s economic trajectory is looking tentatively positive, when analysing consumer and business credit insights a more challenging picture emerges,” McLaughlin said. 

Centrix’s latest Credit Indicator, covering October, shows both mortgage and consumer arrears are tracking above 2023 levels. 

Mortgage arrears have increased by 10% compared with October last year, with 21,300 home loans now past due, or 1.42% of the active population. 

While mortgage arrears remain low historically – and off their yearly peak of 1.51% in February – they have increased for the third consecutive month. 

The past two years have also seen considerable jumps in mortgage arrears over the summer months. 

Last year mortgage arrears spiked from 1.29% in October to 1.47% in January 2024. Prior to that, arrears increased from 1.03% in October 2022 to 1.26% in January 2023. 

McLaughlin said interest rate relief is expected off the back of the Official Cash Rate (OCR) cut last week. 

The Reserve Bank cut the OCR by 50 basis points to 4.25%. 

“There is optimism on the horizon with the OCR cuts likely having a positive knock-on effect on household finances and the cost-of-living pressures easing, putting Kiwi consumers in a better position to pay their bills on time,” McLaughlin said. 

But so far falling interest rates have lagged the OCR, with geopolitical factors among factors at play, including Donald Trump’s recent US election win. 

Meanwhile, the number of consumers behind on their payments rose to 461,000 in October, up 3000 compared with the previous month. 

Arrears levels are now 3.1% higher year on year, equating to 12.14% of the active credit population. 

“We expect these arrears levels to rise over the coming months in line with seasonal trends,” McLaughlin said. 

He said it had been a longstanding trend that arrears rise over the summer and decline over the winter months as household spending tends to be more settled. 

“In summer there is more activity, holidays and spending that puts pressure on the household budget. 

“This has more impact in January, February and March as pre-Christmas spending, holiday expenses and the annual ‘back to school’ expenses bite. 

“Based on previous years we would expect to see this improve as we enter the May to September period and perhaps more so as the impact of interest rates and cost of living start to flow into the household budgets.” 

Hardship significantly up, KiwiSaver withdrawals hit record 

The number of financial hardship cases has risen significantly in the last 12 months, up 20% when compared with October 2023, Centrix said. 

Mortgage payment difficulties (46%) made up the highest proportion of cases, followed by credit card debt (30%) and personal loan repayments (15%). 

McLaughlin said while the rate of growth was easing, “this ties in with the recent reports of record KiwiSaver withdrawals in October for financial hardship reasons”. 

Figures from Inland Revenue show $38.3 million was withdrawn from KiwiSaver funds for financial hardship reasons in October – the highest on record. 

In the year ended June 30, 2024, $300.5m was withdrawn for financial hardship, up from $172.9m the prior year. 

Business liquidations rise 

According to Centrix, company liquidations rose 27% in the 12 months to October. 

Last month 223 companies were put in liquidation, down from 306 in September. 

But liquidations through the first 10 months of the year (2062) have already surpassed the total for 2023 (1837). 

“It’s clear organisations across New Zealand are still bearing the brunt of challenging economic headwinds,” McLaughlin said. 

“Residential building construction, property operators and cafes/takeaway food companies have been the most likely to be placed in liquidation during the last year.” 

Business credit defaults are also higher across the board, up 16% on average year on year. The worst affected sectors include construction (+38%) and transport (+35%). 

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.