Mortgage arrears rising but still low

The number of homeowners behind in their mortgage repayments hit more than 21,800 last month, data from credit company Centrix show.

This is up 16% year-on-year and hit 1.47% last month alone – the highest level before Covid, when mortgage arrears were at 1.49% in March 2020.

While mortgage arrears are rising, they are still at historically low levels. And potential homeowners are not willing to take on the huge debt of a few years ago, with new household lending down 8% year-on-year.

The latest mortgage lending data from the Reserve Bank shows there was $3.4 billion of mortgage lending in January, down 35.6% down from $5.3 billion lent in December. This is historically low. In January 2021 there was $6.4 billion of lending.

Centrix data shows the average mortgage loan for first home buyers was $540,000 in the fourth quarter of last year, falling 9% from a peak of $594,000 in the first quarter of 2022 during the Covid property market boom.

Centrix managing director Keith McLaughlin says the rise in mortgage arrears definitely points towards a normalising trend.

Reserve Bank data also shows non-performing housing loans rose by 10.6% or $160 million in January. This is a year-on-year increase of $721 million, with the current level now at $1,678 million.

However, arrears haven’t resulted in a slew of mortgagee sales. They were up to 81 in the last quarter – the highest since 2017, according to CoreLogic data, but well down on the numbers seen through the global financial crisis (GFC), when in the third quarter of 2009 they hit 767.

CoreLogic chief property economist Kelvin Davidson says the risk for more mortgagee sales are still there with 55% of existing mortgages still to be repriced to higher interest rates over the next year.

McLaughlin says there has been an increase in mortgage stress for a business sole proprietor, with many needing to leverage their home equity to continue funding their businesses – a concerning trend that could spell trouble for these owners in the long term.

He says it is clear the cost-of-living is continuing to impact Kiwi households and businesses across the country and the financial strain is skewed toward the younger demographics.

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