KEY POINTS:
The face of our country's economic recession has been laid bare in latest credit and debt stats released by credit agency Veda Advantage.
Its "biannual snapshot of the New Zealand economy" is based on information gathered from its own credit bureau. The latest numbers look at the six months between July and December 2008.
Total consumer credit enquiries, for hire purchase and personal loans, were down 12 per cent when compared with the year before, , although there was not much change in the overall number of credit applications from the first half of 2008..
Personal loan applications fell 15 per cent compared with the year before, while hire purchase applications for the same period dropped by 11 per cent, and also 11 per cent on the first half of 2007.
Veda managing director John Roberts said the company was expecting to see "a more encouraging January" in terms of credit applications, with tax cuts, lower interest rates and petrol prices all helping.
"However, consumers are clearly bracing themselves for the likelihood of greater stress on household budgets in 2009."
Credit cards applications have stayed steady over the past 18 months, says Veda, with only a 1 per cent fall from the same six months in 2007.
"Consumers are far more likely to turn to flexible lines of credit in order to manage other debt in leaner times, and the incentives that credit card companies are able to offer make them a more attractive proposition than fixed-term credit."
If any one was in any doubt about the frozen property market, then Veda's numbers should change their minds, with a 20 per cent fall in mortgage inquiries during the last six months of 2008. Figures for January were little better, with applications at a five year low.
"It remains to be seen what impact falling house prices and cuts to mortgage rates will have on the market, but the trends we are witnessing through the bureau suggest conditions may worsen further before we see any improvement," said Roberts.
Consumer loan defaults are risings, said Roberts, with an 11 per cent jump compared with the first half of 2008. The older age groups, so-called "baby boomers" were up 20 per cent on defaults.
"It is unusual to see such a dramatic rise in defaults amongst what is normally the most financially stable demographic. This may well be a result of Baby Boomers over-extending themselves during more economically healthy times. With payments on highly-geared mortgages, second homes and high-end goods such as boats and jet skis, they are really starting to feel the pinch."
Things are grim in the commercial world, says Veda, with defaults up 50 per cent compared with the year before. There was a 32 per cent rise from the first half of 2008, with commercial credit applications falling 14 per cent.
"When you compare the statistics from our snapshots of the first and latter half of last year, the accelerating effects of the recession are there in quite stark figures - we've ultimately seen defaults increase by 50 per cent over the last 18 months, while lending and borrowing in the commercial sector has slowed up sharply over the last quarter. This means that creditors are loading earlier and not letting cash flow get out of control."
-HERALD ONLINE
