Rise in households struggling with mortgage repayments

The latest data from credit bureau Centrix show the number of households behind on mortgage repayments rose slightly in September to 21,200, up 1.4% in the month and 13% year-on-year.

Mortgage applications are also on the rise – indicating a property market showing fledgling signs of recovery over spring, Keith McLaughlin, Centrix managing director says.

Reserve Bank mortgage figures show new mortgages lent hit $6.5 billion in September, up 5.7% on August. That is an increase of 26.1% in the September year.

Annual growth in new mortgages for investors increased 54.4%. Coming back into the market after sitting on the side lines for nearly three years, investors took out $1.379 billion in new mortgages in September compared to $894 million in the same month last year. 

Growth in new mortgages for first home buyers was up 10% and they took out the same amount as investors in September, up from $1.235 billion in September last year.

In total, 17,298 new mortgages were taken out, up 2.6% from 16,865 in August and a 15.5% increase on the 14.969 taken out in September last year.

McLaughlin says there will be an easing of financial pressure on households over the next few months. He says the initial relief will be in the cost of household goods.

“Over time, more families will benefit from the reduction in interest rates as home loans roll over, reducing interest costs for both homeowners and investors/landlords.”

Still Centrix data show about 458,000 Kiwis are behind on their payments in September, equating to 12.12% of the credit-active population. While that is 3,000 fewer people behind on a monthly basis, it is still 3.5% higher than last year.

The number of consumers with loans 30 plus days past due is 156,000, of which 74,000 are 90 plus days in arrears.

Centrix says 13,300 consumer accounts are reportedly in financial hardship. Although that number is a drop of 400 on August, financial hardship cases have been increasing since November 2022 and year-on-year are up by 19% even though the rate of growth is subsiding.

Of the hardship cases, 47% are for mortgage repayment difficulties, 29% for credit card debt and 15% for personal loan repayments. The biggest number of hardship cases are close to the Auckland and Wellington main centres.

Businesses struggle

On the business front, companies in trouble are rising rapidly. Company liquidations rose 25% in September year-on-year, reaching 306 – the highest monthly total in a decade. The number is up from 200 in August, Centrix says.

While liquidations are now 25% higher year-on-year, they are low compared to the levels during the GFC.

During the September quarter the biggest number liquidations were in the construction sector with 199, or 28%.

"Over the past year, property operators, residential building construction and cafes/takeaway food companies have been the most likely to be placed in liquidation," McLaughlin says.

"Looking at hospitality, the past 12 months has seen a 34% increase in company liquidations from this sector, with cafes, coffee shops, restaurants, pubs, and clubs particularly badly hit."

Business credit defaults are up 16% year-on-year.

Centrix says the transport industry is the worst affected, with credit defaults up 35% year-on-year, closely followed by the construction sector with credit defaults up 33%. The retail industry is faring the best out of the industries measured, with credit defaults up 3% year-on-year.