Easing rates, but households and businesses still under pressure
Last month, the Reserve Bank cut the official cash rate (OCR) to 3%, continuing its monetary easing cycle in response to subdued economic growth and softening inflation.
With 36% of fixed mortgages set to roll off within the next six months, this could signal relief for many borrowers. However, uncertainty remains around the pace of New Zealand’s economic recovery.
Meanwhile, ASB reports that buying sentiment remains historically strong, supported by high inventory, the prospect of further rate cuts, and stable house prices – even as job insecurity rises due to a weak labour market.
Affordability has also improved significantly. According to Cotality, New Zealand’s houses are now the most affordable since 2019, with mortgage repayments absorbing 44% of median household income – the lowest level in over four years
“Centrix credit data for August paints a mixed picture against a turbulent economic backdrop,” Centrix chief operating officer Monika Lacey (pictured) said.
“Consumer arrears have edged up to 12.41% of the credit-active population, with 480,000 individuals behind on payments – 2,000 more than last month. After six months of improved arrears positions when compared to last year, last month was marginally worse than 2024.
“However, late-stage arrears (90+ days past due) have eased slightly, suggesting some early signs of stabilisation.”
Mortgage arrears improve, refinancing surges
Mortgage arrears improved to 1.38% in July, with 21,200 home loans past due – 400 fewer than in June, Centrix data showed. Lacey said refinancing activity is surging, with mortgage enquiries up 16% as borrowers look to take advantage of lower rates.
New mortgage lending rose 24.4% year-on-year, while non-mortgage lending increased 11.5%, driven by stronger demand for personal loans and credit cards.
Financial stress remains high
Lacey acknowledged that, despite stronger lending activity, financial stress remains high – especially for younger consumers and sole proprietors.
She pointed out that business credit defaults are up 8% year-on-year, while company liquidations are still elevated, rising 26% from last year and led by the construction and hospitality sectors.
The real estate sector has also seen more liquidations. According to Lacey, high interest rates and weak migration have contributed to a decline in property sales, and investors continue to feel pressure as rental yields remain subdued.
“As we head into spring, there is no doubt that while some indicators are improving, many Kiwi households and businesses continue to face financial challenges,” the Centrix leader said. “Staying informed and seeking trusted financial advice will be key to navigating the months ahead.”
Lending and arrears snapshot
- Approved new mortgage lending is up 24.4% year-on-year, with non-mortgage lending up 11.5%.
- Mortgage enquiries rose 16%, reflecting increased refinancing activity.
- Consumer arrears rose to 12.41% of New Zealand’s credit-active population in July, with 480,000 people behind on payments.
- Late-stage arrears (90+ days past due) improved to 81,000.
- Mortgage arrears improved to 1.38% in July, with 21,200 home loans past due.
- Vehicle loan arrears improved to 5.2%, credit card arrears remain at 3.9%, and personal loan arrears reached 9.1%.
- BNPL arrears fell to 7.3%, while retail energy payment arrears rose to 4.2%.
- Telco account arrears dropped to 10.4%.
Business defaults and liquidations still elevated
- Consumer credit defaults are up 4% year-on-year, but the rate of increase is easing.
- Business credit defaults are up 8% year-on-year, with manufacturing and property/rental sectors hardest hit.
- Company liquidations are up 26% year-on-year, with construction and hospitality leading the rise.
What it means for mortgage advisers
While lending activity is up and mortgage arrears are improving, financial stress remains high for many Kiwis – especially younger borrowers and business owners.
Brokers should be proactive in helping clients refinance, manage debt, and navigate a still-challenging environment as the market adjusts to lower rates and ongoing economic uncertainty.
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