"And business credit scores are slightly up, increasing by three points to 764 in March.
"The specific flow-on effect of consumer credit trends is seen in the retail business sector, where defaults were up 19 per cent in March as business owners struggled to balance an impacted cashflow with the looming threat of Omicron potentially forcing employees into self-isolation.
"March represents the rising peak of Omicron, with these impacts expected to ripple into April," he said.
CCCFA restrictions remain a factor for lending conversions in February
The same report showed that since the Credit Contract and Consumer Finance Act (CCCFA) changes came into effect in December, conversion rates have dropped for all major loan types.
"Lenders appear to have rejected 5 per cent of new applicants who would have qualified in November. The hardest hit are credit card applications, which have seen the sharpest drop in approvals in the last three months. Furthermore, new lending across consumer loans was down 26 per cent year-on-year as conversion rates and decreased approval numbers continue to impact lending across the board."
Consumer confidence continues to be impacted
Demand for consumer credit remains down year-on-year, down 9 per cent in March 2022.
Omicron and inflation pressures appear to have hit consumer confidence, with many Kiwis uncertain about the future and self-imposed isolation, including work from home, have resulted in a reduction in foot traffic in main city centres.
"The Buy Now Pay Later (BNPL) sector and bank lending are the hardest hit, while auto finance continues to perform well – reporting similar levels of demand year-on-year.
"Mortgage applications are down 19 per cent year-on-year. Falling house prices combined with lower sales, rising listings, inflation pressures, rate hikes and new lending restrictions appear to be the key drivers of this demand decline."
Successful mortgage lending down year-on-year in February
The value of new mortgage lending was down by 23 per cent in February compared to the same period last year.
"There has been a significant drop in new mortgage lending since the beginning of the year, as several market influences have impacted lending across the board.
"The proportion of home loans with missed payments held flat at 1.04 per cent in February, but down from the 1.22 per cent recorded in February 2021," the report showed.
Buy Now Pay Later account numbers remain high
"There are over 587,000 New Zealanders who are active BNPL users (as reported in CCR). Half (50 per cent) of all active credit consumers aged under 30 years old use BNPL, while the average age of a BNPL customer is 35 years old.
"Furthermore, 7.7 per cent of BNPL customer accounts are currently past due, which are similar levels we see with unsecured personal loans and down from an 8.7 per cent high in 2020."
Business credit demand continues to decline
Comparing year-on-year trends, business credit demand was down by 5 per cent in March this year with impacts in retail trade an hospitality driving these changes.
Retailers are one of the hardest hit sectors at present, with credit defaults up 19 per cent on the same period last year due to falling consumer confidence.
"Furthermore, hospitality and tourism continue to suffer from ongoing restrictions and consumer uncertainty impacting bookings and spending, with credit defaults of 9 per cent and 12 per cent respectively recorded in March. Supply chain issues continue to impact the construction sector, with rising prices and skilled labour shortages also impacting the sector."
