Source: Radio New Zealand
123RF
Consumers’ appetite to spend is growing but many are still struggling to meet their loan repayment obligations.
Data from credit reporting firm Centrix shows consumer credit demand is up 8.3 percent compared to a year ago, driven in large part by mortgage holders shopping around for a better deal and refinancing their debt.
Loan arrears overall are lower than a year ago, but personal loan arrears have hit a 10-year high at 10.2 percent, up 6 percent on last year.
“Consumers with a personal loan that aren’t homeowners are experiencing more difficulty in paying those loans back and that’s probably because homeowners have had some relief through interest rate reductions,” said Monika Lacey, chief operating officer for Centrix.
“People that don’t own a home just aren’t getting that relief flowing through, and their food and insurance costs, for example, have remained at a higher inflated level, whereas homeowners are getting a little bit of relief on the interest rate side.”
The challenges loan holders are battling are also reflected in financial hardship numbers, with personal loan hardships up 45 percent year on year.
Mortgage holders lock in a better deal
Demand for new mortgage lending in the January quarter was up 34 percent on this time last year, with refinancing a major driver. Close to half of all new mortgage lending in December was for refinancing.
“We have seen switching between banks and there is definitely some competition, so consumers are doing the right thing and shopping around and trying to get the best deal.”
Almost three quarters of switching is happening between the four largest banks compared to 56 percent a year ago.
Signs of recovery but liquidations still high
Meanwhile, businesses appear to be struggling to get out of the mire with demand for credit falling and liquidations still at high levels.
The Centrix data shows business credit demand is down 1 percent on a year ago, indicating a lack of optimism among businesses.
Company liquidations rose to 2952 in the year to January, up 16 percent on last year, with 70 percent of those liquidations stem from Inland Revenue action on tax debt.
“There’s a massive clean-up going on and it’s not unexpected as it’s well known in the market,” Lacey said.
“I think the tail is long, but it shouldn’t get any worse than what it is.
“I think it’s also really important to point out that although the liquidations are higher than they’ve been for a while, when you look at the relevance by industry, it’s still really small.”
Lacey said sector-wise, construction is the leading contributor to liquidations followed by hospitality.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
