The number of home loan borrowers in financial difficulty has risen 10 per cent since the end of the government's mortgage deferral scheme.
The scheme which was set up in response to the Covid-19 lockdowns amid concerns over pending job losses allowed borrowers to defer payment for up to six months and was available until March 31.
But figures from credit bureau Centrix show the number officially in financial hardship hit 11,900 in April, up from 10,800 in the prior month.
Centrix managing director Keith McLaughlin said those classified as being in financial hardship were based on borrowers who had sought help from their lender because they could not make payments.
"It's effectively where the borrower goes and seeks assistance because they are in a position where they can't maintain the payments."
He said what was happening now was the small number that remained on a payment deferral once the scheme ended were reclassified and in most cases had gone straight into hardship classification.
McLaughlin said despite the rise, he was surprised at the low numbers that had gone into hardship.
"At the peak of the time there were tens of thousands of loans in deferral. To have that small number of loans roll over at the end of March was really pleasantly surprising."
At the peak of the mortgage deferral scheme at the end of May last year around 7 per cent of mortgage account holders put $22.2 billion worth of mortgage debt on hold, deferring payments for up to six months.
With around 1.4 million mortgage accounts held by New Zealanders, that meant roughly 98,000 mortgages were put on ice.
Reserve Bank data shows as of April 2 the value of the outstanding deferrals was $219 million.
McLaughlin said for those borrowers who had rolled over into financial hardship there would be ongoing dialogue with their lender.
"A number will have already been restructured on to interest-only, an extended term or lower payments now with higher payments later, so a lot of those will have already been restructured."
"I don't think you will see an increase in mortgagee sales because I think with property prices being where they are at the moment there is the option for the borrower to say I will put my hand up and sell my house."
"I don't think you will see the banks pushing the panic button on this because the equity is there."
If interest rates were to rise or the property market to fall substantially leading to negative equity - a situation where the loan amount is higher than the value of the property - that could change the scenario, he said.
"But under the current environment I think there will be a steady as she goes."
McLaughlin said the numbers in hardship were slightly above pre-Covid times. "But not materially so."
He said hardship figures were similar to where they were in early 2020. "That is amazing when you consider what has happened over the last 12 months and the number of people that went into deferral."
Those who went on to deferral didn't have their credit scores damaged which meant there was not long term impact on their credit history and future ability to borrow.
Meanwhile, demand for mortgages remained high.
In March residential mortgage lending was up 26 per cent month on month setting a new record for March and in April demand was up 20 per cent on its baseline, despite the reintroduction of loan to value ratios on March 1 and the Government's property tax changes.
"It spiked in March because of the incoming legislative changes where people moved in anticipation of that. April stayed up quite high and I think that was really just a carryover from that."
He said it would be over the next couple of months that it would be able to see if the changes had made a difference.
McLaughlin said demand for credit cards had ticked up 4 per cent last month but was still below pre-Covid levels.
Meanwhile, buy now pay later demand was still going strongly with some choosing the new product over credit cards.
"It is not racing away like it was but I think it is still pretty solid."
Overall, demand for credit was almost back to pre-Covid level at around 94 per cent.
"Credit is a leading indicator of confidence. People borrow when they feel confident that they can meet future repayment obligations.
"The strength of the credit market shows that despite the challenges of the past 12 months, we are seeing a return of confidence and stability."