More Kiwis in debt - Centrix

The Reserve Bank thinks a shallow recession is needed to haul inflation back from its elevated rate of 7.2% towards the desired median of 2%.

But the credit research company Centrix believes some people are going through a recession already and it is not always shallow.

Its latest monthly credit indicator found the number of New Zealand borrowers who were behind on repayments climbed 5% year-on-year in October 2022. And three quarters of the finance companies that lent to them had higher arrears in October compared with September.

Looked at another way, Centrix found 4.2% of credit active consumers were more than 30 days overdue, up from 4.0% a month earlier.

A total of 2.3% of consumers were more than 90 days in arrears. Consumer credit defaults were also up 21% year-on-year.

Centrix also reported payments were overdue on 15,200 mortgages. It qualified this by saying the problem was a lot worse five years ago, but a steady decline since then was reversed three months ago and the number is climbing upwards once again.

The fall in arrears from 2017 was attributed to declining interest rates, which were helped by the Reserve Bank's money creation during the pandemic. Those interest rates are now on the way back up.

Demand for consumer credit was up with the demand for personal loans rising 18.1% and motor vehicle loans rising 17.3% year on year.

But in a sign of the times, mortgage lending continued to remain down compared with previous years as the economic climate remained a barrier for many aspiring homeowners.

Centrix said new residential lending was down 36% year-on-year in October.

Regarding business loans, Centrix said the hospitality sector had shown strong activity after recovering from the Covid lockdowns and subsequent restrictions.

Tourism, construction and financial services were also improving. But the retail sector was showing persistent defaults while consumer confidence was falling.