Interest rates

Credit data shows consumers are hurt by rising prices and interest rates

The disruption and jitters generated by Omicron, along with rising prices and interest rates, are weighing more on consumers, but there are signs of improvement for businesses.

The latest data from Centrix indicates fewer credit defaults and better creditworthiness.
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Latest data from credit reporting firm Centrix shows demand for consumer credit fell 6% in the year to April and mortgage applications fell 12%.

The company’s monthly credit report showed the number of consumers missing payments for unsecured credit such as Buy Now Pay Later and telecom contracts was near a two-year high, while creditworthiness s is also relaxed.

“Arrears are also rising across the board as Kiwis begin to struggle to repay in the face of rising costs of living,” said Centrix chief executive Keith McLaughlin.

He said demand for mortgages had fallen 12% in the past year and mortgage values ​​had fallen by nearly a third as the housing market slowed, mortgage rates rose and that obtaining credit became more difficult.

“Borrowers are being pushed into longer-term mortgages to keep payments as low as possible, with 57% of new mortgages in 2022 issued with 30-year loan terms.”

McLaughlin said mortgage arrears remained low but had increased, which he saw as “an early signal of growing financial difficulties and a potential sign of future trouble”.

However, he said there were signs of a pick-up in business credit demand, with fewer credit defaults and better creditworthiness.

“[This] could point to signs of recovery across the country, or companies managing their cash flow and making tough calls before they find themselves in financial difficulty,” he said, adding that the retail and in the hotel industry showed signs of recovery.

McLaughlin said he expects financial difficulties and credit demand to continue throughout the year.