Mortgage arrears still challenging

Centrix figures show the number of mortgage holders struggling to make their repayments dipped by 700, or 1.44%, from April to May. In total there were 21,900 borrowers overdue on their repayments.

RBNZ data show non-performing mortgage loans increased by $28 million in May to nearly $2.5 billion. That was a rise of 1.2% from April and is up significantly from $1.2 billion in May 2023. Of this number $534 million was impaired, a rise of $30 million or 6% from April.

While mortgage arrears are improving, according to Centrix, 15,000 people are in hardship and struggling to pay their bills – an increase of 300 from April and up 14% from a year ago.

Almost half of these cases (46%) were due to difficulties paying mortgages, a rise of 19% year-on-year.

Centrix managing director Keith McLaughlin says this continues a steady upward trend from November 2022.

All of this has been happening since mortgage rates have come down by about 2% since August last year.

Non-performing loans have risen to just under 0.7% of the country’s outstanding $372 billion  mortgage book on housing stock worth $ 1.62 trillion, RBNZ data series reveal.

Non-performing loans past due but not impaired have dropped a tad and stand at $1.915 billion, down from $1.916 billion in April. They stood at $1.57 billion a year ago. .

After the GFC non-performing loans rose to 1.2% and are not predicted to reach that level, despite mortgage holders suffering under high interest rates over 2022/23. The RBNZ had predicted they would peak at 0.7% this year. 

Challenges persist

Times are tough for people running a business.

While credit demand has grown by 9% compared to the same time last year, with notable increases in the retail trade (25%), hospitality (23%), and financial and insurance services (18%) sectors, this has been over-shadowed by a 14% rise in business defaults across all industries, McLaughlin says.

Company liquidations have risen 27% year-on-year, partly due to increased enforcement activity by the IRD.

The construction sector has been hit the hardest – more than 750 building firms have gone into liquidation in the past 12 months.

“Businesses, particularly in construction, property, and hospitality, continue to face significant challenges,” he says.

The highest rates of business failures have been in residential construction, property development and operations, hospitality (especially restaurants and cafés), and road freight transport.