1 Dec 2022

Demand for personal and vehicle loans increasing sharply - Centrix

7:26 am on 1 December 2022
Parked cars for sale, car yard.

Car loans were up 17 percent year-on-year, according to the latest data from credit bureau Centrix. File photo Photo: 123RF

More people are suffering from the effects of tighter household budgets due to high inflation and rising interest rates.

Consumer arrears were up 5 percent in October from a year prior, with demand for personal and vehicle loans increasing sharply, according to the latest data from credit bureau Centrix.

Personal loan demand was up 18 percent year-on-year, with car loans up 17 percent, while for the third consecutive month home lending arrears increased.

"This is the third month is a row that home lending arrears have gone up - I would expect to see that trend continue well into next year as the full impact of the new interest rates and cost of living impacts household budgets," Centrix managing director Keith McLaughlin said.

"While we're three months into what I would call serious arrears, it's going to get worse over the next six to 12 months."

Climbing home loan arrears were significant because people prioritised keeping up with their mortgage payments, McLaughlin said.

"Households have a certain budget and disposable cash, and they prioritise what they pay first," McLaughlin said.

"The first thing they tend to pay is their mortgage, and then they pay for their secured car that they get around in, and it goes down the order," he said.

"We're seeing those who generally live on a tight budget and young borrowers feel the pinch the most, being forced to cut back on non-essential spending due to cost of living pressures and other external factors."

The cut-back of spending was also impacting retail businesses, McLaughlin said.

"As consumer confidence continues to dwindle, and costs rise we have seen an increase in business defaults in the sector."

Despite this negative sentiment, the hospitality and tourism sectors had seen some positive activity as international travellers return to New Zealand's shores.

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