Credit performance improves despite rising inflation and higher interest rates
New Zealand's consumer credit performance continued to improve in June, with arrears falling to their lowest level since 2021, according to Centrix's latest Credit Indicator report.
Arrears ease despite rate rises
Centrix data shows consumer arrears fell to 10.65% in June, while mortgage arrears dropped to 1.20%, their lowest since December 2022. This is despite the OCR rising to 2.5% in early July, as the Reserve Bank works to contain inflation, now at 4.1% annually.
Centrix chief operating officer Monika Lacey (pictured) said the trend, while positive, needs to be read alongside ongoing cost pressures.
"The improvement in arrears is encouraging, but elevated inflation, higher interest rates and winter costs leave the outlook finely balanced," Lacey said.
She added that "households and businesses concerned about repayments should speak with their lender or a trusted financial adviser early."
That balance will be tested again on 2 September, when the RBNZ hands down its next OCR decision.
Renters and personal loan holders remain exposed
Not all borrowers are benefiting equally. Centrix reports that 84,000 consumers remain 90 or more days behind on payments, with renters continuing to be disproportionately represented, accounting for roughly 70,000 of these cases.
Personal loan hardship has also risen sharply, up 37% year-on-year, and now makes up 24% of all hardship cases nationally.
Mortgage lending activity has also cooled after a stronger start to the year, with new household lending down 4.5% year-on-year in the June quarter and approved mortgage lending 5.6% lower than the same period last year, as buyers respond cautiously to the tightening cycle.
Business conditions remain mixed
On the business side, credit demand has softened and liquidations remain elevated, particularly in hospitality and retail trade, though construction's long-running dominance of liquidation volumes is beginning to ease.
Encouragingly, business defaults are declining and the average credit quality of new applicants has improved, pointing to stronger performance among active borrowers.
Centrix flagged particular exposure among small business owners, noting that sole proprietors with multiple businesses are experiencing "nearly three times the mortgage stress recorded among non-business owners."
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