Demand for lending up

Arrears on vehicle loans have risen for the fourth consecutive month to 4.5 per cent, reports Centrix.

Posted on 05 September, 2022

Credit bureau Centrix reports demand for personal lending is up but so are arrears.

The company’s latest monthly credit indicator shows personal loan demand is 29 per cent higher than it was this time last year.

While this compares with August 2021 when Auckland entered an extended Covid-19 lockdown, demand is also ahead of the same month in 2020.

However, people are also starting to struggle to meet their commitments with 7.9 per cent of unsecured personal loans in arrears compared with around seven per cent a year ago.

And arrears on vehicle loans have risen for the fourth consecutive month to 4.5 per cent, the highest since early 2021.

Keith McLaughlin, pictured, Centrix’s managing director, says the increase in demand for credit and arrears points to New Zealanders being under pressure to meet repayment obligations,

He adds: “Vehicle repayments are traditionally one of the last repayment obligations people let slip and the ongoing growth in arrears may indicate underlying pressure for households.”

Demand may be up but tighter lending restrictions under the Credit Contracts and Consumer Finance Act (CCCFA) continue to impact, lenders say.

Harmoney released its full-year results last week showing its loan book grew by 37 per cent in the year to June to a total $685m. Most growth was in the Australian market – up 113 per cent to A$287m – while Harmoney’s New Zealand loan book grew just three per cent to NZ$370m.

The New Zealand business had been “impacted by new lending regulations applied to all consumer lenders in December 2021, which are now being partially relaxed”, says the company.

Kiwibank’s result for the 12 months to June showed a similar trend. The easing of the CCCFA rules is only having a moderate effect and most of its 10 per cent increase in lending occurred before December, says Steve Jurkovich, chief executive officer.

Arrears on discretionary payments – such as buy-now, pay-later (BNPL) – are also on the rise, Centrix reports. BNPL arrears are now at 8.5 per cent of accounts, up from 7.9 per cent in 2021. This compares with arrears on credit cards of four per cent.

Default risk for under-30s, who are big users of BNPL, is similar across all unsecured loan products, adds Centrix, but mortgage arrears remain low as Kiwis prioritise keeping a roof over their heads.