Distressed home loans reach record highs

The latest figures from Centrix and the RBNZ show the drop in interest rates is not yet helping the surge in mortgage arrears and non-performing loans.

Mortgage arrears reached an eight year high last month, with 23,700 home loans past due, a 6% year-on-year increase, Centrix data show.

Looking at seasonally adjusted mortgage delinquencies, there are signs of early arrears stabilising, but 90 plus days arrears are still rising, Keith McLaughlin, Centrix managing director says. 

He says it will be interesting to see how changes to interest rates across the banks impact these figures as the year progresses. About half of all mortgages are due to roll onto new interest rates over the next six months. 

In the January quarter, new mortgage lending rose by 17.7%.

" While many predict further cuts to the OCR later this year, the economic climate remains challenging for many households and businesses across New Zealand," McLaughlin says.

The trend in mortgage distress is also obvious from RBNZ figures, which show non-performing housing loans increased by $165 million, or 7.6%, the biggest monthly rise since June 2020 when the pandemic was gathering speed.

The central bank’s loans by asset quality figures reveal total non-performing loans were at $2.328 billion at the end of January and have increased by $650 billion, or 38.8% year-on-year.

That makes up 0.64% of the $365.5 billion in outstanding mortgage stock – the biggest ratio since 2013.

During January the amount of impaired loans rose by $27 million to $457 million, while the amount of 90 days past due, but not impaired, loans rose by $138 million to $1.871 billion.

Just over two years ago non-performing loans stood at $850 million. Since then that figure has risen 174% or $1.478 billion to the January’s total of $2.328 billion.

Housing lending stock increased by $1.4 billion, or 0.4%, in January, down on December’s $1.7 billion increase.

Owner occupier lending increased by $998 million, or 0.4%, while residential investor lending increased by $387 million, or 0.4%.

The housing lending annual growth rate rose from 4.1% to 4.3%, marking its highest point since November 2022.

Meanwhile Centrix data show financial hardships reached the highest level since June 2020 with 14,700 accounts in this sphere, a 20% year-on-year increase. Among these, 46% relate to mortgage payments, 30% to credit card debt and 16% to personal loans.

In business, company defaults have risen across all sectors, particularly construction and transport, with liquidations up 38% over the past year.

The North Island had a 35% increase in liquidations, while the South Island had a whopping 67% rise. 

In the professional sector, 204 companies were placed into liquidation, a 45% year-on-year increase, highlighting challenges due to a reduction in demand for services.

McLaughlin says it is important for business owners to make sure their financial house is in order, especially as the economy is uncertain for the remainder of the year.