Low consumer confidence and tight lending criteria are continuing to dent demand for credit, and the recent easing of lending rules is unlikely to bring about immediate change.
Latest data from credit reporting firm Centrix shows consumer credit demand is down 9 percent in the year to March, and mortgage applications down 19 percent.
Centrix said credit card approvals have been the hardest hit since the Credit Contracts and Consumer Finance Act changes came into effect in December.
Managing director Keith McLaughlin said the government's recent moves to ease the rules wouldn't make a difference straight away.
"Credit providers and lenders out in the marketplace put an awful lot of work into their systems in the lead up to the December changes.
"With the ongoing uncertainty about what the final process may look like ... credit providers aren't making material changes to either their systems or the training they put in their people," he said.
McLaughlin said consumer confidence was the biggest factor affecting the country's credit landscape, with an overall decline in demand and lending conversions on the cards.
He said with uncertainty around Omicron, a retreating housing market, increasing mortgage rates and rising inflation, consumers had tightened their purse strings for discretionary spending.
Data also showed consumer hardship was becoming more apparent, with arrears on personal loans increasing to 7.8 percent in February, the highest level recorded since March 2020, when the country entered its first Covid lockdown.
But consumers continued to meet their repayment obligations elsewhere.
"Mortgage arrears are holding up quite nicely ... so I think consumers are tending to maintain their payments on mortgages but other traditional loan-type things are starting to extend out into the arrears," McLaughlin said.
RNZ
