Lower Mortgage Rates

PHOTO: New Zealand has become a high cost environment. FILE

As New Zealanders grapple with high interest rates and the rising cost of living, the incidence of mortgage loan arrears in the country has begun to diminish. However, amidst this improvement in homeowners’ financial situations, there is a concerning trend of increasing delinquencies in personal and vehicle loans.

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In July, the most recent data from the Centrix Credit Indicator revealed that vehicle loan arrears reached a three-year high, surging to 6 percent, marking a year-on-year rise of 31 percent. Simultaneously, personal loan arrears saw a 9 percent increase in July, with a 17 percent year-on-year rise.

Keith McLaughlin, the Managing Director of Centrix, shared some insights on this complex financial landscape during an appearance on AM. He emphasized that there is a silver lining in the report: for the second consecutive month, the number of mortgage arrears has decreased.

McLaughlin noted, “This sends a very positive signal to the market, suggesting that households in New Zealand may be adapting to the new economic environment and are now managing their household budgets more effectively.”

However, even with the month-on-month decline in mortgage delinquencies, there were still 18,800 mortgage accounts in arrears in July, marking a substantial 31 percent year-on-year increase. In an overall assessment, there are over 400,000 accounts in arrears, a level that has persisted for a considerable duration.

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Regarding the uptick in personal and car loan arrears, McLaughlin speculated that New Zealanders tend to prioritize their payments, with mortgages taking precedence, followed by auto loans, credit cards, and personal loans. He suggested that the increase in auto loan arrears could be a consequence of significant growth in the auto loan portfolio over the past 12 months, leading to a flow-on effect in delinquencies.