“New credit card application inquiries have risen to their highest level since November 2021, indicating consumers are increasingly seeking alternative methods to handle their payments,” Centrix managing director Keith McLaughlin said.
“It seems households are continuing to face challenges when it comes to credit arrears and repayments.”
Financial hardship cases were up 24% year on year, Centrix said.
“These cases, which are an indicator of financial strife, have been rising on the whole since November 2022,” McLaughlin said.
Nearly half (45%) of hardships relate to mortgage payment difficulties, with 29% to credit card debt, and 17% to personal loan repayments.
Mortgage arrears improved in August, with 20,700 home loans reported as past due – down 300 from last month.
However, mortgage arrears are tracking 12% higher year on year.
The proportion of home loans reported in arrears fell to 1.39% in August, down from 1.41% in July but remains low historically.
Mortgage demand remains subdued, with new home loan application inquiries up just 0.2% year on year.
Business credit defaults, liquidations up
McLaughlin said New Zealand’s economic challenges are being felt more acutely.
Business credit defaults were up 5% year on year across all sectors in August.
The transport and construction industries have been hit particularly hard, sitting at +25% and +22% year on year respectively.
In particular, small business owners have been facing higher levels of mortgage stress in the last couple of years compared with non-business owners.
“Sole proprietors who own two or more businesses [are] experiencing more than double the level of debt stress compared to non-business owners,” McLaughlin said.
“This often results in these sole proprietors leveraging their home equity to fund their businesses and maintain operations.”
Company liquidations meanwhile have risen 19% year on year.
In the first eight months of 2024 there have been 1532 liquidations compared with 1208 over the same period in 2023, Centrix figures show.
This has been led by construction companies, with 546 placed in liquidation in the past 12 months, accounting for one in four overall liquidations.
“Companies from this industry [are] more than twice as likely (2.2x) to fail than the typical New Zealand business,” McLaughlin said.
“Construction companies represent 12% (84,000) of all registered companies across the country, with 26% of liquidations across all sectors coming from the construction industry.”
Hospitality liquidations rose 31% year on year.
“As we move into the final few months of the year, it’s imperative those seeking to safeguard their financial future seek out sound advice as early as possible to prepare for the next few months and beyond,” McLaughlin said.
