Personal loan arrears hit highest level in a decade: Centrix data
Tuesday, 3 March 2026
Debt for personal loans has risen to the highest level recorded in the past decade, but lending activity is rebounding and positive signs are emerging, credit reporting agency Centrix says.
Centrix collects data on loan repayments by households and businesses, and its latest figures suggested the market was starting to react to the economic climate with lending activity picking up.
In February the Reserve Bank held the official cash rate (OCR) at 2.25%, and signalled it believed the key interest rate would need to rise sooner than it had previously thought.
But it also said that if the economy evolved as expected, monetary policy was likely to “remain accommodative for some time”.
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Centrix’s figures showed consumer credit demand was up 8.3% year-on-year in January, and that mortgage and personal loan inquiries were strong.
But there were still signs of household pressure as personal loan arrears reached the highest level recorded in the past decade – climbing to 10.2% in January, up 6% year-on-year.
Buy Now Pay Later debt came in at 8.6%, but remained broadly unchanged on an annual basis.
Renters and non-homeowners hit hardest
Centrix chief operating officer Monika Lacey said the figures revealed a tale of two economic situations as the type of borrowers that applied for personal loans tended to be non-homeowners.
The cost of living was still high, and while inflation was dropping prices were not going down, she said.
“Homeowners have had some relief because interest rates have gone down a bit, but those without homes may not be seeing that relief coming through.
“The biggest indicator we are seeing around personal loan arrears and hardship is the demographic that tends to opt for a personal loan.”
In contrast to mortgage or car loans which are secured, personal loans are unsecured loans and usually have higher interest rates because they are priced for greater risk, she said.
“This is also reflected in the financial hardship trends. While overall cases are down year-on-year, personal loan hardships are up 45% year-on-year and now account for nearly a quarter (24%) of all hardship cases.”
There were some seasonal factors at play as arrears typically increased post-Christmas to peak in January and February because it was a costly time for households, she said.
Consumer arrears lifted to 12.56% in January, but that was down year-on-year, the figures showed.
Lacey said that not only had the arrears figure been down annually for several months in a row now, which made for a positive trend, it would drop back again after the seasonal peak.
Insolvency pressures
There were other pockets of concern in the figures with company liquidations still high, and up 16% year-on-year, she said.
“A large part of that is due to an Inland Revenue tidy up, with nearly 70% of all liquidation applications initiated by IR, compared with 30% to 40% in 2020/21.
“But the figure has been stabilising over recent months, the percentage of businesses impacted is low and signs of improvement are emerging across seven of the 19 industry sectors.”
Construction remained the sector with the highest number of liquidations, with 758 firms entering liquidation over the past year, up 12% on the same time last year.
It was followed by hospitality with 382 liquidations, a 53% annual increase.
Despite the challenges, lending activity was rebounding, the figures showed. New mortgage lending up 34.0% year-on-year in the January quarter, while new non-mortgage lending was up 15.9% over the same period.
Lacey said mortgage refinancing had been a defining feature of recent lending activity, reaching record levels in December.
That was largely driven by lower interest rate and cashback offers as competition between the major banks intensified, she said.
“It’s no secret that people are shopping around for good deals and are willing to change providers to get them. Many mortgages have come off higher fixed rates and people want to take advantage of what is now on offer.”
Mortgage arrears rose to 1.42% in January, with 22,600 home loans past due, but despite the month-on-month lift, mortgage arrears were 9% lower on an annual basis, the figures showed.
Lacey said their figures were one economic indicator that suggested something similar to other indicators, and when it was all put together the situation was more positive than it was a year ago.
“The road to recovery seems to be coming into clearer view, but there are still challenging times ahead as the economy turns a corner.”