Mortgage borrowers catch up on arrears

The latest data from Centrix shows 22,500 mortgage accounts are past due, with arrears improving to 1.39% in March, down from 1.42% in the previous month.

This is a 12% year-on-year improvement, with lower interest rates continuing to ease repayment pressure for home loan borrowers.

Also helping ease the pressure are borrowers ahead on loan repayments. ANZ says about 44% of its home loan borrowers are at least six months ahead on repayments, and 48% have a savings buffer of at least $5,000.

Seasonally adjusted mortgage delinquencies also continued to improve, with 1–29 day arrears down 14% year-on-year and 90+ day arrears down 12%.

Growth in new residential mortgage lending eased in March following a strong January and February. Approved new mortgage lending is up 10.7% in the March quarter compared with the prior year. Mortgage enquiries for the year also up at 11.3%.

However, serious financial stress is still affecting a small group of borrowers.

Mortgage-related hardship remains the biggest category, accounting for 37% of all hardship cases, followed by credit cards at 34%.

Across the board lending is holding up despite softer confidence signals as global uncertainty remains elevated.

Higher oil and refined fuel prices are expected to add to transport and other costs at a point when the recovery is still finding its feet, and there is a broad expectation by economists and business leaders we’re yet to see the full impact filter through.

ANZ chief risk officer Ben Kelleher says the economy is heading into a stagflationary environment – a low or no growth environment and increasing inflation.

Centrix chief operating office Monika Lacey says a softer tone is beginning to show in borrowing behaviour.

Consumer credit demand remains above last year’s level, but enquiry volumes have eased in recent weeks. “Activity is still holding up in home loans, auto lending, and personal loans, while demand across other consumer credit categories remains more subdued.”

She says there are, however, still some encouraging signs, with new lending figures remaining above last year’s level across both mortgage and non-mortgage products, and repayment performance continues to improve.

Liquidations remain elevated

In the business sector, company liquidations and insolvencies reached an 11 year high in March. 

Liquidations rose to 3,023 on a rolling 12-month basis, up 15% year-on-year. There were 286 company liquidations and 308 insolvencies, making it the highest March total for liquidations since 2015.

Construction remains the leading industry for company liquidations, with 768 firms liquidated in the past year, although this represents just 0.9% of all registered construction companies.

Hospitality is the second biggest contributor, recording 399 liquidations – an increase of 49% compared with the previous year.
Inland Revenue activity also continues to influence insolvency and liquidation levels and remains an important factor when interpreting current business stress.

Signs of improvement emerge in selected sectors

While liquidation levels remain elevated overall, trends are improving across six of the 19 industry sectors, notably agriculture, wholesale trade, and manufacturing. Business credit defaults are also down 16% year-on-year.

Agriculture remains one of the stronger- performing sectors, with credit demand up 10%, defaults down 27%, liquidations down 6%, and an average credit score of 793.

Manufacturing is also showing some improvement, with liquidations down 5% year-on-year, although credit demand remains weaker and conditions still vary across sub-sectors.