Mortgage arrears hit an eight-year high despite falling interest rates
He said there were different data sources that “probably don’t look as concerning”.
Reserve Bank figures show the ratio of banks’ non-performing housing loans in January was 0.6%, up from 0.5% in January 2024.
This remains well below the 1.2% seen post the Global Financial Crisis (GFC) of 2008.
“They [Centrix and Reserve Bank] tell a similar story in the sense they are going up, but perhaps they are not going up at the same rate.
“Generally, most people are still managing.”
Davidson highlighted rising unemployment as one reason for the lift in mortgage arrears, despite an easing in interest rates.
“The period where interest rates were really high, the labour market was helping, because unemployment was really low. Then just to the point where unemployment started to rise, then interest rates came down.”
Unemployment has risen from a record low 3.2% in 2022 to 5.1% in the last quarter of 2024.
“It might be that once the economy has turned around and once the labour market has turned around you might see some lingering mortgage stress because it’s probably the last domino if you like,” Davidson said.
“There’s not going to be a big blowout in mortgage delinquencies.”
He said falling interest rates will be limiting any shift in mortgage arrears.
Centrix managing director Keith McLaughlin said the figures, although concerning, are largely due to a historical drag from the seasonal trends, with people also not having refixed to lower rates yet.
“It’s a clear indication that many Kiwi homeowners are feeling the pinch at the moment.
“We expect rising mortgage arrears trends to stabilise in line with falling interest rates and further predicted OCR [Official Cash Rate] cuts.
“Looking at seasonally adjusted mortgage delinquencies, there are signs that these arrears are stabilising over time.”
Kiwis behind on debt repayments nearly half a million
The number of people behind on their payments increased by 21,000 in January to 491,000, when compared with December, according to Centrix.
McLaughlin said the arrears cycle typically peaks at this time of year, following the festive and summer season.
“Despite this, arrears are tracking 3% lower year on year, marking the first year on year improvement since December 2021,” he said.
Financial hardships reached the highest level since June 2020, with 14,700 accounts reported to be in hardship in January, an increase of 400 from the previous month and a 20% year on year increase.
Among those cases, 46% relate to mortgage payments, 30% to credit card debt and 16% to personal loans.
Liquidations surge
Company liquidations surged by 38% over the past year, according to Centrix.
In January, 92 companies were placed into liquidation, up from 59 in January 2024.
The construction sector continues to be severely affected, making up 24% of liquidations in January.
On an annual basis, construction company liquidations rose 44% and were 2.3 times more likely to fail than other businesses.
Transport liquidations were 76% higher, followed by hospitality (+49%); property/rental (+41%); manufacturing (+37%); and retail trade (+5%).
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.