Personal credit demand, arrears rise as costs bite

AUCKLAND: More New Zealanders are turning to personal loans and ‘‘buy now, pay later’’ schemes as rising living costs tighten their grip.

This coupled with rising credit arrears, now at a threeyear high, has one industry leader cautioning those looking to service credit.

Demand for personal loans spiked in December, climbing 17.7% year on year, according to credit bureau Centrix’s latest Credit Indicator.

The number of new consumer loans granted was up 27% year on year in December, as lending exposure of $636 million was up from $500 million in December 2021.

Demand for buy now, pay later services rose 6.8% last month compared with the same period last year.

Meanwhile, there were 410,000 New Zealanders behind on their debt repayments in December — accounting for 11.3% of the active credit population — and a 10% increase compared with December 2021.

This is the highest level recorded by Centrix since February 2020.

Centrix managing director

Keith McLaughlin said while credit arrears were at a level similar to prepandemic figures and still low by historic standards, this year’s broader economic landscape was vastly different.

‘‘Our latest data . . . when taken with the current economic climate points towards a difficult 2023 for many.’’

Vehicles arrears were up 5.3% in December, the highest since June 2020.

‘‘A rise in vehicle arrears points to the challenges facing households, as this is usually one of the last credit repayments people let slip.’’

Staying on top of repayments was paramount for financial wellbeing.

‘‘Slipping behind and getting into bad credit habits can impact people’s ability to borrow in the future — especially for anyone wanting to take out a mortgage and get on the property ladder.

‘‘All consumers should give careful consideration to their ability to service any form of credit before entering into a commitment.

‘‘Then, they should consider the most appropriate credit to suit their requirements and circumstances.’’

Missed mortgage repayments crept up to 1.17% in December, the largest proportion since April last year (1.23%).

There are now 17,200 mortgage accounts past due, according to Centrix.

New mortgage borrowing fell 43% year on year in December from $7.3 billion to $4.1 billion as the housing market continues to decline.

New mortgage demand was also down 26.2% year on year last month.

The latest figures come on the back of stubbornly high inflation, which last week was revealed to have increased 7.2% in the 12 months to December.

This followed another 7.2% annual increase in the September quarter last year, and a 7.3% increase in the June quarter.

Food prices also leaped by the largest margin in 32 years in December, up 11.3% from a year earlier.

‘‘Anyone struggling with meeting their repayment obligations should get in touch with their lender as soon as possible,’’ Mr McLaughlin said.

‘‘It’s better to have something in place than to ignore the problem and negatively impact your financial reputation.’’ —