Households boosted by falling interest rates
Photo:
Unsplash/ Artful Homes
Credit bureau Centrix says households are starting to feel the benefit of lower interest rates and weaker inflation - but some people are still feeling the pinch.
It has released its latest data, which shows demand for both consumer and business credit rose in May, up 4.9 percent and 8 percent respectively year on year.
It was the fourth month in a row that overall consumer arrears were lower than in 2024.
"The main thing we're seeing is the three-month trend of consumer arrears decreasing," said managing director Keith McLaughlin.
"That's a really positive sign and it shows consumers are starting to feel the benefit of the reduction in the cost of living and also the reduction in interest rates. I think we're starting to see that flowing through to households now and they are managing their budgets a lot better."
He said it always took a while for the impact of falling interest rates to be felt.
"We are certainly starting to see a more positive attitude from consumers. I think more consumer confidence is coming back into the market. That in turn is flowing through into some of the businesses where they are now starting to see things improve slightly so across the board I think we've seen a bit of an improvement in the economy."
The proportion of people who were behind on their borrowing fell to 12.43 percent of the consumer "credit active population" or about 483,000. That was down from 12.61 percent the month before.
But the number of consumers who were more than 90 days overdue on a payment had risen to its highest level since July last year, at 83,000.
Mortgage arrears improved to 1.49 percent, or 22,600 home loans past due, down 1400 on the month before.
Centrix said mortgage inquiries were up 22 percent, reflecting more activity in the housing market.
Approved new mortgage lending was up 22.5 percent in the April quarter compared to the same period last year. It remains 17 percent below the same period in 2021, during the property market boom.
Centrix said people under 25 were feeling the most financial pressure because they had limited buffers and more exposure to instability.
Middle-aged households were next most affected.
The number of financial hardship cases increased and was up 13.3 percent but Centrix said that could be a positive sign of people highlighting difficulties with lenders and putting plans in place.
Company liquidations remained high, up 30 percent on the previous year but Centrix said the rate of growth was starting to ease.
There were 175 liquidations in April, and Centrix said the situation was particularly challenging for smaller firms in construction, property and hospitality.
Over the past year, 730 companies in the construction sector were liquidated - an increase of 48 percent compared to the previous year.
Property operators, cafés and takeaway food, and road freight companies were also commonly placed into liquidation over the past year.
McLaughlin said he expected to see the improvement continue.
"Mainly because we're also seeing credit demand increasing - as people go out and buy things either houses or cars or something on credit, that's staring to trend up again and that reflects consumer confidence going forward. If consumers feel as though they don't have the certainty of a job they certainly won't go out and spend money on credit."
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