New Zealanders are falling behind on their bills at the lowest rate in five years, yet the recovery is landing unevenly, with renters, people carrying personal loans and small business owners still under real strain.
Credit bureau Centrix published its July Credit Indicator this week, covering July credit activity and June arrears. It shows consumer arrears fell to 10.65 percent of the credit-active population in June, the lowest reading since 2021. The number of people behind on payments dropped to 420,000, down 12,000 on May, and the arrears rate is now 13.9 percent lower than it was a year ago.
Centrix chief operating officer Monika Lacey told RNZ the direction of travel was encouraging, while stopping short of declaring the pressure over. “Credit conditions continue to improve. Consumer arrears are continuing to trend downwards, which is a really positive sign,” she said. “And businesses are also starting to demonstrate that they are able to meet their obligations sooner.”
Home loans tell the same story. Residential mortgage arrears fell to 1.20 percent in June, the lowest level since December 2022, with 19,600 mortgage accounts past due. That is a 15 percent improvement on a year earlier. Seasonally adjusted, the shallowest category of late payments was down 14 percent year on year and the most serious 90-day-plus category was down 15 percent. Credit card arrears sat at 3.8 percent, auto loan arrears eased to 5.2 percent from 5.4 percent, personal loan arrears improved to 8.7 percent and Buy Now Pay Later arrears fell to 7.1 percent, 15 percent below the same point last year.
Beneath those averages sits a group that has not moved. There are still 84,000 consumers 90 days or more past due, and around 70,000 of them are renters. Financial hardship cases numbered 13,550, down 150 on May and 6.3 percent lower than a year ago, but the mix has shifted. Credit cards have overtaken mortgages as the single biggest source of hardship, at 35 percent of cases against 34 percent for home loans. Personal loan hardship has jumped 37 percent in a year and now accounts for almost a quarter of all cases. People aged 35 to 39 record the highest rate of hardship of any age group.
What makes the improvement notable is the backdrop it happened against. The Reserve Bank lifted the Official Cash Rate to 2.50 percent on 8 July, its first increase in more than three years. Stats NZ then reported annual inflation of 4.1 percent for the June quarter, driven largely by fuel, electricity and council rates. Households are repairing their balance sheets while the cost of living and the cost of borrowing are both climbing.
They appear to be doing it partly by not borrowing. Consumer credit demand was down 7.3 percent year on year. The falls were concentrated in flexible, discretionary products, with credit card enquiries down 15.8 percent, retail energy enquiries down 20.7 percent and Buy Now Pay Later demand down 24.9 percent. Enquiries held up only in the big, deliberate categories, with mortgage enquiries up 10.5 percent, auto loans up 8.0 percent and personal loans up 4.8 percent.
“I think consumers are being a little bit cautious at the moment and probably making slightly better decisions when it comes to discretionary lending products,” Lacey said. “So, where they might have gone out to borrow for some item that perhaps isn’t an essential item, they might be thinking twice about it. There’s still a little bit of uncertainty in the economy.”
One of the more striking findings in the report has nothing to do with the current cycle. The credit card is quietly disappearing from younger wallets. There are now about 1.99 million card holders in New Zealand, 12 percent fewer than in 2019, and the number of people holding more than one card has collapsed 45 percent to roughly 550,000. The average age of a card holder has risen six years over the past decade to 57, while the average age of a new card holder has barely moved, sitting around 42. Centrix reads that as a market ageing because young borrowers are not joining it, rather than because people are taking longer to get their first card.
New household lending has also lost momentum after a strong start to the year, down 4.5 percent year on year in the June quarter. Approved new mortgage lending fell 5.6 percent on the same quarter last year as buyers turned cautious in the face of rising interest rates.
The business half of the report is where the recovery looks thinnest. Business credit demand fell 4.3 percent year on year. On the positive side, business credit defaults were down 13 percent and the average credit score of new business applicants rose to 744 in June, seven points better than a year ago. Company registrations were up 9 percent, at 62,100 over the past 12 months.
Failures went the other way. Company liquidations rose 15 percent over the year to 3,073, and company closures were up 16 percent at 52,050. Construction remains the largest single contributor with 755 liquidations, or 0.9 percent of the sector, although Centrix says that annual trend is finally starting to ease. Hospitality is heading in the opposite direction, with 419 liquidations, up 47 percent year on year, and the highest failure rate of any sector at 1.3 percent. Retail trade liquidations rose 39 percent to 230. There were 286 company insolvencies in June alone, against 252 in June last year.
The report also draws a line between those business failures and the household numbers at the front of it. Sole proprietors who own two or more businesses are experiencing close to three times the mortgage stress of people who own no business at all, and they carry far larger loans, averaging about $915,000 against $693,000 for single-business owners and $526,000 for non-business owners. Many are using the equity in the family home to fund or prop up the business, which works while trading is good and turns the house into the exposure when it is not.
Lacey’s advice to anyone in that position was to act early rather than wait. “So, if you are having difficulty as a business or as a person meeting your payment obligations, the best thing you can do is reach out to your credit providers or your financial advisers and work through a plan for how you can resolve those arrears,” she said.
Are you seeing the improvement in your own finances, or does it look nothing like your situation? Tell us what your last twelve months have been like 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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