Consumer confidence and lower interest rates driving mortgage activity

Consumer confidence appears to be returning as demand for credit and mortgage lending increased in September, according to credit agency Centrix.

Centrix’s latest Credit Indicator report showed new residential mortgage lending was up 21.1% year on year in September.

Overall, new household lending increased by 20.2% year on year as borrowers refinance to secure lower rates.

“Monetary easing is reflected in a notable lift in household lending,” said Centrix managing director Keith McLaughlin.

The Official Cash Rate (OCR) has fallen 300 basis points (bps) since August last year, providing some relief for home owners refixing their mortgages.

“The continued decline in the OCR is beginning to reshape New Zealand’s credit landscape, providing a much-needed boost to both households and businesses,” McLaughlin said.

New non-mortgage lending, including credit cards, vehicle and personal loans, rose 10.3% year on year.

Meanwhile, the number of people behind on their payments improved to 465,000 – or 11.99% of the active credit population – in September, down 3000 compared with August.

“Despite the challenging economic environment persisting, credit trends show some hopeful signs of recovery emerging,” McLaughlin said.

But McLaughlin said the recovery was unevenly distributed, with a clear divide emerging between the North Island and South Island.

“The South Island shows strong credit improvement, driven by lower arrears and renewed lending growth,” he said.

“Dairy farming confidence is high, construction outlook is improving, and hospitality trading performance is holding up well.”

McLaughlin said the Bay of Plenty, Waikato, Auckland, Manawatū and Hawke’s Bay are showing moderate recovery.

This was led by agriculture activity in the rural areas, with construction pipelines picking up in some areas.

“Northland, Gisborne, Taranaki and Wellington continue to lag, with elevated arrears and business liquidations,” he said,

“Construction and [the] housing market remain slow.”

Company liquidations also show signs of improvement in seven of the 19 industry sectors reported on, according to Centrix.

Construction remains the leading industry for company liquidations, with 726 firms liquidated in the past year – an increase of 23% compared with the previous year.

“However, this accounts for only 0.9% of all registered companies in the sector,” McLaughlin said.

Hospitality is the second-highest industry in terms of company liquidations, with 303 recorded in the past year – up 41% year on year.