More mortgage loans tip into non-performing group

The latest RBNZ figures show the amount of non-performing loans at $2.457 billion. That is $9 million, or 0.4%, more than in May and up $550 million, or 28.9%, from $1.907 billion in June last year.

In the central bank’s data series – Banks assets by loan qualities – it shows within the total of non-performing loans $546 million is impaired, an increase of $12 million from May and up from $383 million in June last year.

Banks’ mortgage loans 90 days past due but not impaired have dropped $4 million to $1.911 billion from $1.915 billion in May but are significantly up from $1.524 in the same month last year. 

Banks had predicted a peak of 0.7% of non-performing loans and the figure has remained at that level since March this year. The total in the mortgage pile is $374,113 billion.

Of the $44,928 billion lent for commercial property, $351 million is non-performing, $210 million of that figure is impaired while loans 90 days past due but not impaired is at $141 million.

Mortgage arrears dropping

The latest data from Centrix show mortgage arrears declined 1.44% in May, down from 1.49% in April and 2% lower than the same time last year.

There are 21,900 mortgage accounts past due — 700 fewer than in April.

In the May quarter, total new household lending rose by 17.1% compared to the same period last year. This growth was largely driven by an 18.6% year-on-year increase in new residential mortgage lending, reflecting heightened market activity and borrowers switching banks to get  better interest rates.

Despite this rebound, mortgage lending remains below the levels seen during the 2021 property boom, although mortgage inquiries, were up 21.8% year-on-year in May as interest in home lending begins to grow.

Hardship is becoming a big issue. Nearly 15,000 accounts are in financial hardship, an increase of 300 from the previous month.

The number of hardship cases has been steadily rising since November 2022 and is now 14.4% higher than a year ago. Almost half of these cases (46%) are due to difficulties with mortgage payments, which have increased by 19% year-on-year.

For Kiwi business owners, credit demand has grown by 9%. However, this growth has been accompanied by a 14% rise in business defaults across all industries.

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.

Financial services health

There are more than 90,000 companies in the financial and insurance sector, making up more than 12% of all registered businesses.

In the past year, 105 companies in this sector went into liquidation, the same number as the previous year.

While business failures have declined in areas such as financial asset investing, financial services, and holding companies, there has been an increase in liquidations among insurance services, advisers, and trustee services.

Despite these shifts, the sector’s overall credit health remains strong, with an average credit score above 800.