New Zealand is splitting into two economies, and the latest credit data shows the gap getting wider. Households are slowly clawing their way out of trouble as interest rate cuts feed through to monthly budgets, yet the businesses that employ them are failing at the fastest rate in more than a decade.
The figures come from credit bureau Centrix, whose monthly Credit Indicator tracks how many people are behind on loans, mortgages, power bills and other debts. Its most recent report shows the number of New Zealanders in arrears fell to 432,000, down 11,000 in a single month and the lowest level in four years. That is a real shift after a long stretch in which the arrears count kept grinding higher.
Mortgage holders are leading the recovery. Around 20,700 home loan accounts were behind on payments, the lowest figure since September 2023 and down 12 percent on a year earlier. The average mortgage rate has dropped to about 4.85 percent, well below the 5.91 percent borrowers were paying a year ago, and every cut in the official cash rate has handed households a little more breathing room when their fixed terms roll over.
Borrowers were in a stronger position than they were a year ago, helped by lower mortgage rates and a gradual easing in repayment pressure, said Centrix chief operating officer Monika Lacey. She added that “households are still cautious about taking on new debt”, with consumer credit demand down 5.3 percent over the year as people pay down what they owe rather than borrow more.
Not everyone is feeling the relief. About 89,000 people remain 90 days or more past due, and 74,000 of those most severely behind are renters who own no property to refinance and who have not benefited from falling mortgage rates. “This pressure is particularly visible among renters and borrowers with products such as personal loans, credit cards, and buy now, pay later,” Lacey said.
The pattern shows up in the hardship numbers too. Around 13,700 accounts were in formal financial hardship, down 8.5 percent on the year, but the make-up of that group has changed. Credit cards have overtaken mortgages as the largest source of hardship, accounting for roughly 36 percent of cases, or about 5,000 accounts, while mortgage-related hardship has slipped to 35 percent. People are managing their home loans and falling behind on the higher-cost debt instead.
While households edge back from the brink, the business side of the ledger is going the other way. Company liquidations reached 3,035 in the year to May, up 14 percent on a year earlier, and Centrix expects the full-year total to be the highest since 2010. That puts business failures back at levels last seen in the aftermath of the global financial crisis.
Construction remains the single biggest source of collapses, with 755 firms tipped into liquidation over the year as a thin pipeline of new building work and tight margins caught up with builders, subcontractors and developers. Hospitality has been the fastest-deteriorating sector, with 421 cafes, restaurants and bars liquidated, a jump of 51 percent. Retail trade liquidations rose about 35 percent.
“Hospitality remains one of the most vulnerable sectors, with restaurants, cafés, pubs and takeaway businesses continuing to face significant pressure,” Lacey said. The squeeze reflects cautious diners as much as rising costs. Newswire reported this week that New Zealand households are cutting back on eating out at the fastest pace since 1991, and that pullback lands directly on the businesses Centrix is now watching fail.
The divergence between recovering households and failing firms is mostly a story about timing. Interest rate cuts reach indebted home owners quickly, because a lower rate cuts a mortgage payment the moment a fixed term resets. Businesses, by contrast, are still carrying the damage from more than two years of weak spending, and a company can limp along for many months before the bills finally catch up with it. Liquidations tend to peak well after the wider economy has started to turn, which is why failures can keep climbing even as the consumer picture brightens.
There are signs the property market is stirring again at the top end. Centrix says more than 134,000 home owners now hold mortgages above $1 million, and more than 18,000 carry loans above $2 million, a group that has grown rapidly over the past year. The average size of a new loan has risen to around $560,000, and first-home buyers now make up about a quarter of new mortgages as easier lending rules and lower rates draw them back in.
For the wider economy the key question is whether business failures are near a peak or still building. If arrears keep falling and spending recovers, the liquidation wave should crest later this year and ease into 2027. If households stay cautious and keep their wallets shut, more firms in hospitality, retail and construction will run out of road first. The full data set is published on the Centrix Credit Indicator page each month.
For now the message from the numbers is mixed but clear enough. The people of New Zealand are slowly getting back on top of their bills. The businesses that serve them are not yet out of the woods.
Are you seeing the recovery in your own household budget, or watching local shops and cafes struggle to hang on? Share what you are seeing in your town in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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