11 May 2021

Mortgages in hardship rose 10% in April - Centrix

2:23 pm on 11 May 2021

The number of homeowners struggling to pay their mortgage increased last month but the situation is not as bad as first feared.

A mans hand holds NZ dollar bills against a front of a traditional villa house in Auckland, New Zealand. Buy, sale, real estate, insurance, mortgage, bank loans and housing market concept.

Photo: 123RF

Data out from the credit reporting firm Centrix shows a 10 percent increase in the number of mortgages in arrears in April, taking the total to about 11,900.

The government-backed mortgage deferral scheme ended in March, prompting concerns that the level of arrears would rise sharply and possibly result in forced mortgagee sales.

However, Centrix managing director Keith McLaughlin said the outlook was not as bleak as first thought.

"I think [the level of mortgages in hardship] could have been a lot higher if there had not been as much co-operation between the lenders and the borrowers, and I think it really reflects well on the willingness of both parties to work through the difficult situations and either restructure loans or come up with some alternative way to avoid consumers going into hardship."

He said the number of mortgages in arrears would rise slightly in the coming months but mortgagee sales would be unlikely because borrowers in hardship could take advantage of the strong housing market and sell their properties.

Meanwhile, the demand for credit remained strong and was back to 94 percent of pre-Covid 19 levels.

New mortgage lending was up by more than a quarter in March, setting a new record for the month.

"While March usually sees strong activity in the housing market, we anticipate it was particularly high this March as house purchasers looked to financially settle ahead of the Reserve Bank's LVR restrictions coming into effect," McLaughlin said.

There also continued to be an appetite for automotive finance and credit from buy now, pay later services, such as After Pay.

"This strength speaks to the recovery that has occurred following the collapse in the credit market this time last year when the country went into the level 4 lockdown," McLaughlin said.

"This indicates there continues to be a high level of confidence in the economy."

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