More than 450,000 Kiwis behind on debt repayments as festive spending season looms

More than 450,000 Kiwis are behind on their repayments, according to data from Centrix. Photo / 123rf

Inflation and interest rates are falling, but Kiwi households are still doing it tough leading into the festive season.

New data from Centrix shows mortgage and consumer arrears remain high and could stay that way into the new year.

Around 458,000 Kiwis were behind on their payments in September, equating to 12.12% of the credit-active population, according to Centrix’s latest Credit Indicator report.

While the figure fell by 3000 on a monthly basis, arrears are 3.5% higher than last year.

“We expect arrears to rise over the summer period, in line with forthcoming festive spending and wider seasonal trends,” said Centrix managing director Keith McLaughlin.

McLaughlin said there will be an increasing easing of financial pressure on households over the coming months.

“The initial impact [will come from] relief in the cost of household goods, such as food prices.

“Over time, more families will benefit from the reduction in interest rates as home loans roll over, reducing interest costs for both homeowners and investors/landlords.”

But the main benefit from the changing economic indicators will be evident in consumer confidence, McLaughlin said.

“A percentage of the population is currently not spending as they don’t have the disposable funds for discretionary spending, and those with available cash are adopting a conservative approach and delaying non-essential expenditure, such as buying new cars and investing in renovations.”

The number of homeowners behind on their mortgage repayments rose slightly in September to 21,200, up 13% year on year.

The percentage of mortgages in arrears climbed to 1.41%, however it remains low by historical levels.

“[Mortgage] applications are also on the rise ... indicating a property market showing fledgling signs of recovery over spring,” McLaughlin said.

Meanwhile, financial hardship cases fell by 400 to 13,300 but are up 19% compared with September last year.

McLaughlin said financial hardship cases overall have been rising since November 2022.

“Of these hardships, 47% relate to mortgage payment difficulties, 29% to credit card debt and 15% to personal loan repayments,” he said.

“The highest rates of financial hardship are observed close to the Auckland and Wellington main centres.”

Business failures surge

Company liquidations climbed to a 10-year monthly high of 306 in September, up from 200 in August, according to Centrix.

Liquidations are now 25% higher year-on-year but are again low compared to levels seen during the Global Financial Crisis.

In the first nine months of the year, there were 1838 companies put in liquidation, up from 1181 over the same period last year.

McLaughlin said the construction industry continued to see the highest proportion of these liquidations, while the hospitality sector had also taken a hit.

“Hospitality businesses are more than two times more likely to fail than the typical New Zealand business, with cafes, coffee shops, restaurants, pubs and clubs particularly badly hit,” he said.

“During the last 12 months, there were 212 hospitality companies placed into liquidation, compared to 158 for the same period last year.”

McLaughlin urged both businesses and consumers to plan for these challenging times and seek advice from trusted advisers where needed.

“With the festive season and the end of the year fast approaching, the data suggests these acute challenges will continue to bite.”

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.