Meanwhile, Reserve Bank (RBNZ) data shows banks’ non-performing housing loans rose a further $61m between February and March to $2.412 billion.
Non-performing housing loans are up $647m since March last year, from $1.765b.
The percentage of non-performing housing loans is now 0.7%, the highest it’s been since April 2013 – but remains below highs of 1.2% after the Global Financial Crisis.
Squirrel founder John Bolton told the Herald New Zealand was seeing the effects of the Reserve Bank over-tightening when it put rates up a couple of years ago.
“The reality is that you’ve got a lot of really damaged households out there that are still living with the consequences of high living costs and high mortgages last year.
“When you go into recession it probably takes a year or two before you really start to see the reality of that hit households.
“I don’t think it’s a lead indicator, it’s a lag indicator.”
Bolton said lower interest rates hadn’t flowed through to households in a meaningful way yet either.
“As much as interest rates are falling, people are still coming off high rates.
“You don’t get an immediate impact of lower rates.
“Second half of the year they will really start to benefit from the lower rates.”
RBNZ data shows the average residential mortgage rate (fixed and floating) being paid in February was 6.18%, still higher than the 5.98% being paid in February 2024.
Bolton said lower rates alone were not enough to fix the problem.
“The reality is when you’ve been through a pretty nasty recession for a couple of years it takes more than lower rates to fix that.
“Things are on the improve but it takes a while for that to flow through to the economy.”
489,000 people behind on repayments
Centrix’s data also showed the number of consumers in arrears increased to 489,000 in March, up 9000 from the previous month.
“This rise aligns with the typical seasonal peak in arrears following summer when household finances are often strained,” said Centrix managing director Keith McLaughlin.
However, the current arrears rate (12.61%) is 0.7% lower compared to the same period last year.
“[This] could signal signs of recovery in the credit cycle,” McLaughlin said.
Meanwhile, personal loan arrears hit double figures (10%) for the first time since February last year, reflecting a 4% year on year increase.
“Buy now pay later” arrears continued to decline, falling to 8.4% in March – a 7% year on year decrease.
The rate of financial hardship cases continued to slow. There were 14,400 accounts reported in financial hardship in March, a decline of 200 from February but up 11.5% year on year.
“Although financial hardship cases have been rising since November 2022, this has shown a slowdown in recent months,” McLaughlin said.
Mortgage payment difficulties accounted for 45% of financial hardship cases.
Construction woes dominate liquidations
Company liquidations rose 35% in the year to March, Centrix said.
Construction firms continue to face significant challenges, with more than 720 building companies going into liquidation in the past 12 months. The next highest sector was property (296).
Business credit defaults also rose 18% year on year across all sectors, led by transport (+38%), construction (+29%) and manufacturing (+26%).
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics
