Credit arrears and business liquidations are returning to pre-pandemic levels, with those behind in their repayments sitting around levels last seen four years ago, according to credit reporting firm Centrix.
Its latest monthly report shows 426,000 people in arrears in July from 414,000 the month before. That represents 11.7 percent of active consumer borrowers, the highest in four months, but also heading to levels of four years ago.
The data was mixed with evidence households were looking to keep a lid on discretionary spending such as buy-now-pay-later (BNPL), but were also turning to personal loans and credit cards to make ends meet.
Centrix managing director Keith McLaughlin said the numbers were coming off the low base during the pandemic, but even with the prospect of the Reserve Bank being done with further rate rises the stresses on households and businesses were clear.
"As the current economic environment remains difficult for consumers, more people are turning to short-term lending options."
McLaughlin said under 25-year olds were among the most financially stressed, at its highest level since the start of 2020, with areas such as telco payments and personal loans going into arrears ahead of BNPL and credit cards.
Overall, credit arrears were 7.5 percent higher than a year ago, with rises in vehicle loan arrears to a three year highs, as well as a 17 percent rise in those behind in repaying personal loans, credit cards, and smaller rises for utilities, especially for telecommunications services.
Buy now pay late arrears were down at a five month low of 9.4 percent, and mortgage arrears were sitting steady at 1.3 percent.
Demand for credit was also mixed with new household borrowing overall down 2 percent on a year ago, but a near 25 percent rise for credit cards, and mortgage lending down 2 percent.
"The rate of decline has significantly eased, signalling the housing market downturn could be running out of steam," McLaughlin said.
The number of businesses in default and going into liquidation rose in July, with increasing numbers of property and rental property firms in default, while building related firms had the highest level of liquidations.
However, there continued to be a rise in business credit demand notably in hospitality.
"The remainder of 2023 will continue to be challenging for Kiwi households and businesses alike," McLaughlin said.
He expected households and businesses to "batten down the hatches" but said as long as they managed their finances carefully and levels of employment stayed high then he expected borrowers to come through the economic downturn in reasonable shape.