Households look to be managing their debt more carefully with a slight fall in the number of people in arrears and reduced demand for credit, according to credit reporting firm Centrix.
Its April monthly report shows 411,000 people behind in their payments - down from 427,000 in March, the first drop in three months.
The level of mortgage arrears dropped for the first time in eight months, with falls also for buy-now-pay-later, consumer and credit card arrears, but a rise in auto finance loans.
Centrix managing director Keith McLaughlin said it was too early to say households were getting on top of their debts but the data suggested borrowers were getting used to the high interest rate environment and the slowing economy.
"While it's too early to tell if this is a sign of plateauing, it's encouraging to see arrears growth slow for a month as people either get on top of their repayments or make arrangements with their creditors to get through these tough times."
McLaughlin said 10,000 more people had gone on to hardship repayment settings since the start of the year which was a sign that lenders were working with borrowers to get through the difficulties.
Overall credit arrears were still 4 percent higher than a year ago, although they remained at an historically low level.
Credit demand was mixed with a 28 percent fall in mortgage lending on a year ago, tracking the decline in the property market, but an increase in other consumer lending especially vehicle loans, with overall household lending 26 percent lower on a year ago.
McLaughlin said the debt pressures now seem to be heavier for the business sector with credit defaults up 13 percent on a year ago, and company liquidations having increased by 31 percent in the same period, with construction and property related businesses suffering the most.
"It remains a challenging time for Kiwi business owners, especially during a time of record-low unemployment. It appears the economic stage has been set for the remainder of 2023.
"Businesses should be taking time to credit check potential customers and suppliers before extending credit to ensure they're working with reliable entities," McLaughlin said.