A new report has found the number of financial hardship cases and company closures in New Zealand dropped last quarter.
The June Credit Indicator from Centrix, which outlines key credit trends in Aotearoa, said they're experiencing another record-low in hardship levels that they haven't seen since December 2019, with only 8750 borrower accounts flagged in financial hardship.
"This is the lowest level reported since December 2019 and down 3 percent on the previous month, meaning people are not experiencing severe financial distress," Centrix said in its report.
"However, across May the number of people missing repayments rose for the third month in a row, which runs contrary to the seasonal trend that's typical this time of year.
"The total number of people who are behind on payments is up 11.7 percent compared to the same time last year, indicating some consumers are starting to experience financial strain."
Similarly, the proportion of home loans with missed payments is still low, at only 1 percent in May.
Centrix said this means there are still no signs of mortgage stress, despite the recent rate hikes and higher costs of living.
"But, as the economy tightens, we expect more households will struggle to pay all their bills," they said.
Also, new residential mortgage lending is down 34 percent year-on-year, but it's only 4 percent down on pre-pandemic May 2019, the report found.
"Consumer lending continues to decline, down 20 percent on last year, and down 19 percent on
the same time in 2019," Centrix said.
"Following a similar trend, mortgage applications are down 25 percent, due to the housing market downturn.
"However, auto loan and personal loan demand both remain stable compared to the same period last year, with lending up 1 percent and 0.3 percent, respectively."
Personal lending is low, with customer enquiries for buy now pay later and new credit card demand also dropping by 32 percent and 22 percent year-on-year, respectively.
In business, low company closure and liquidation rates show "a level of resilience" for the economy, Centrix said.
Closures were down 37 percent this quarter, compared to the previous quarter, and company liquidations were also down 14 percent year-on-year.
But company credit defaults are starting to increase, specifically in the building and hospitality sectors, since they've experienced the highest default rates since the final quarter of 2019, Centrix said. Similarly, credit demand in the hospitality sector fell sharply at 21 percent year-on-year and agriculture credit demand is down 24 percent year-on-year.
"As we manage these changing economic times, it is now more important than ever for businesses to manage their credit risk and for Kiwis to proactively manage their personal debt," Centrix said.
"We recommend people talk to their lenders sooner rather than later if they are experiencing any financial distress."
