More New Zealanders are turning to personal loans and ‘buy now, pay later’ schemes as rising living costs tighten their grip.

This coupled with rising credit arrears, now at a three-year high, has one industry leader cautioning those looking to service credit.

Demand for personal loans spiked in December, climbing 17.7 per cent year-on-year, according to credit bureau Centrix’s latest Credit Indicator.

The number of new consumer loans granted was up 27 per cent year-on-year in December 2022, with lending exposure of $636 million, up from $500m in December 2021.

Demand for buy now, pay later services rose 6.8 per cent in January 2023 compared with the same period a year earlier.

Meanwhile, there were 410,000 Kiwis behind on their debt repayments in December - accounting for 11.3 per cent of the active credit population - and a 10 per cent increase compared with December 2021.

This is the highest level recorded by Centrix since February 2020.

Centrix managing director Keith McLaughlin said while credit arrears were at a level similar to pre-pandemic figures and still low by historic standards, the broader economic landscape in 2023 was vastly different.

“Our latest data ... when taken with the current economic climate points toward a difficult 2023 for many.”

Vehicles arrears were up 5.3 per cent in December, the highest since June 2020.

“A rise in vehicle arrears points to the challenges facing households, as this is usually one of the last credit repayments people let slip,” McLaughlin said.

McLaughlin said staying on top of repayments is paramount for your financial wellbeing.

“Slipping behind and getting into bad credit habits can impact people’s ability to borrow in the future – especially for anyone wanting to take out a mortgage and get on the property ladder.

“All consumers should give careful consideration to their ability to service any form of credit before entering into a commitment. Then, they should consider the most appropriate credit to suit their requirements and circumstances.”

Missed mortgage repayments crept up to 1.17 per cent in December, the largest proportion since April 2022 (1.23 per cent). There are currently 17,200 mortgage accounts past due, according to Centrix.

New mortgage borrowing fell 43 per cent year-on-year in December 2022 from $7.3 billion to $4.1b as the housing market continues to decline. New mortgage demand was also down 26.2 per cent year-on-year for January 2023.

The latest figures come on the back of stubbornly high inflation, which last week was revealed to have increased 7.2 per cent in the 12 months to December 2022.

This followed another 7.2 per cent annual increase in the September 2022 quarter, and a 7.3 per cent increase in the June 2022 quarter.

Food prices also leaped by the largest margin in 32 years in December, up 11.3 per cent from a year earlier.

“Anyone struggling with meeting their repayment obligations should get in touch with their lender as soon as possible,” McLaughlin said.

“It’s better to have something in place than to ignore the problem and negatively impact your financial reputation.”