TL;DR
Consumer Arrears on the Rise – Mortgage arrears are up 7% year-on-year, with personal loan and BNPL arrears also increasing, reflecting financial strain beyond seasonal trends.
Housing Market Uncertainty – House prices declined in 2024, but experts predict a 5% recovery over the next two years, tempered by affordability challenges.
Debt-to-Income (DTI) Restrictions Introduced – Implemented July 2024, DTI caps aim to curb risky lending but may slow housing market growth.
Business Lending Pressures – Defaults have surged across construction (+33%), transport (+35%), and hospitality (+17%), with liquidations at their highest in a decade.
As we step into 2025, financial pressures continue to weigh on many New Zealand households, with consumer arrears rising and mortgage stress becoming more pronounced. The latest Centrix Credit Indicator Report highlights a 7% year-on-year increase in mortgage arrears, alongside a seasonal spike in consumer debt following the holiday period. While some of this is expected, the broader economic landscape—including changes in lending policies, debt-to-income ratios, and shifts in house prices—suggests deeper challenges ahead. In this blog, we’ll explore the key trends driving consumer arrears, the impact of seasonality, and practical steps individuals can take if they find themselves struggling financially. We’ll also examine how business lending is evolving and what it means for New Zealand’s economic outlook.
Current Trends in Consumer Arrears
The Centrix Credit Indicator Report for January 2025 reveals a seasonal uptick in consumer arrears, with 470,000 New Zealanders behind on their payments—an increase of 6,000 from the previous month. This aligns with historical trends, where spending over the festive period leads to higher reliance on credit products such as personal loans, credit cards, and Buy Now, Pay Later (BNPL) services. While arrears typically rise post-Christmas due to seasonal spending patterns, this year’s arrears levels remain higher than pre-COVID levels, suggesting that financial strain may be more persistent than just a seasonal fluctuation.
Among the most affected credit products, personal loan arrears rose to 9.2% in December, up from 8.1% in November, reflecting an increasing dependence on unsecured borrowing. BNPL arrears also experienced a modest rise, reaching 8.2%, though this remains slightly lower than the previous year. Meanwhile, credit card arrears rose month-on-month but remain 5% lower year-on-year, suggesting that some consumers are prioritising revolving credit repayments over fixed-term loans. However, the biggest concern comes from mortgage arrears, which saw a 7% year-on-year increase, now affecting 22,100 mortgage accounts. This rise is particularly significant given that nearly half of all reported financial hardship cases relate to mortgage repayment difficulties.
While a slight easing of lending restrictions—such as adjustments to the Credit Contracts and Consumer Finance Act (CCCFA)—has contributed to a small uptick in new borrowing, many households continue to feel financial pressure. With the Consumer Price Index rising 2.2% in the December quarter and interest rate cuts anticipated, the question remains whether these measures will provide enough relief to stem the growth in arrears or if we will see further strain in the months ahead.
The Impact of Seasonality on Financial Obligations
Seasonality plays a significant role in shaping consumer financial behaviour, with the post-Christmas period consistently showing an increase in arrears. Holiday spending, travel, and gift purchases often lead to higher reliance on credit cards, personal loans, and Buy Now, Pay Later (BNPL) services. Some households find themselves stretched financially in January as repayment deadlines loom, compounded by school or university fees and other expenses that typically come due at the start of the year, contributing to a predictable rise in missed payments. The Centrix Credit Indicator Report confirms this trend, with consumer arrears increasing in December 2024, aligning with historical patterns. This seasonal effect is particularly evident in short-term credit products, where balances tend to spike during the festive season and take months to stabilise.
However, while seasonal trends explain short-term increases in arrears, the broader financial picture suggests deeper concerns. Arrears levels in 2024 were already higher than pre-COVID levels, pointing to more structural financial pressures rather than just holiday overspending. Rising living costs, mortgage stress, and changes in lending conditions have created a landscape where more households are struggling to keep up with repayments. The question now is whether seasonal arrears will subside as they typically do or whether this year’s increases indicate a longer-term shift in consumer financial stability.
Over the past 12 months, New Zealand's housing market has experienced notable fluctuations. In December 2024, the national median home value decreased by 0.2%, marking the ninth decline in ten months. This brought the average home value to $902,414, reflecting a 0.3% decrease from the start of the year and a 15.2% drop from the market's peak over three years ago. (corelogic.co.nz; qv.co.nz)
Despite these declines, certain regions have shown resilience. For instance, the West Coast recorded the largest annual increase in residential property prices in December 2024. (statista.com)
Additionally, first-home buyers have benefited from the falling house prices, accounting for 27-28% of all homes sold during the year—a record-high share. (nzherald.co.nz)
Looking ahead, experts predict a modest recovery. A Reuters poll forecasts that New Zealand home prices will rise by approximately 5% over the next two years, driven by anticipated lower interest rates boosting demand. (reuters.com)
However, challenges such as stretched affordability, abundant listings, and a softening labour market may temper this growth. (corelogic.co.nz)
On 1 July 2024, the Reserve Bank of New Zealand (RBNZ) implemented Debt-to-Income (DTI) ratio restrictions to enhance financial stability and promote sustainable lending practices. These restrictions limit the proportion of high-DTI lending that banks can undertake. Specifically, banks are permitted to allocate up to 20% of new owner-occupier lending to borrowers with a DTI ratio exceeding six, and up to 20% of new investor lending to those with a DTI ratio over 7. (rbnz.govt.nz)
The introduction of DTI restrictions aims to mitigate the risks associated with high household indebtedness, which can pose significant threats to financial stability, especially during economic downturns. By capping the amount of high-DTI lending, the RBNZ seeks to ensure that borrowers maintain manageable debt levels relative to their income, thereby reducing the likelihood of loan defaults. This move complements existing Loan-to-Value Ratio (LVR) restrictions, providing a more comprehensive framework for prudent lending. (rbnz.govt.nz)
Industry experts have offered varied perspectives on the potential impacts of these restrictions. Some analysts suggest that the DTI caps could lead to a more cautious lending environment, potentially slowing down the housing market. However, others believe that the measures are necessary to prevent unsustainable borrowing and to protect the broader economy from the adverse effects of a housing market correction. The balance between maintaining credit accessibility and ensuring financial prudence remains a focal point in discussions about the long-term implications of the DTI restrictions. (fitchratings.com)
Business Lending: An Evolving Landscape
Business lending in New Zealand has faced a shifting landscape over the past year, influenced by economic uncertainty, rising credit defaults, and sector-specific pressures. While overall new household lending increased by 12.4% year-on-year, business credit demand has remained uneven, with some industries struggling to secure financing amid tighter lending conditions. According to the Centrix Credit Indicator Report, business credit defaults rose by 22% year-on-year, with sectors like construction and transport facing the most significant financial stress. As banks and lenders become more cautious, businesses—especially SMEs—are navigating a more challenging credit environment, balancing the need for capital with the increasing cost of borrowing.
Over the past year, New Zealand's business lending landscape has faced significant challenges, particularly in the construction, transport, and hospitality sectors. According to the Centrix Credit Indicator Report, business credit defaults have risen by 16% year-on-year, with the transport industry experiencing a 35% increase, the construction sector up by 33%, and the hospitality sector seeing a 17% rise. These escalating defaults indicate mounting financial stress within these industries. (interest.co.nz)
Company liquidations have also surged, reaching levels not seen in a decade. In September 2024, liquidations increased by 25% year-on-year, totalling 306—the highest monthly figure in ten years. The construction sector was notably affected, accounting for 28% of these liquidations, with 546 construction firms liquidated over the past 12 months. The transport industry also faced a dramatic rise, with 131 companies entering liquidation in 2024, a 79% increase from 73 in 2023. Similarly, the hospitality sector saw a 34% uptick in liquidations, particularly impacting cafes, restaurants, and pubs. (interest.co.nz)
Several factors contribute to these liquidations. In the construction sector, financial pressures such as high interest rates, increased material costs, and labour shortages have strained cash flows, leading to a higher risk of insolvencies. The transport industry has grappled with elevated operational costs and reduced demand, exacerbating financial difficulties. In the hospitality sector, lingering effects of the COVID-19 pandemic, including fluctuating consumer demand and staffing challenges, have led to increased business failures. Collectively, these challenges underscore the need for businesses to adopt robust financial management and strategic planning to navigate the current economic landscape. (bcicentral.com)
A note on the variation on reported numbers: There are several reasons why the Centrix Credit Indicator Report may show different figures compared to other sources like Interest.co.nz, BCI Central, or government data:
1. Differences in Data Sources
Centrix compiles its data primarily from credit providers, banks, and financial institutions that report credit activity and defaults. This means their data is based on credit accounts, arrears, and payment behaviours.
Other sources, like Interest.co.nz, may rely on government records, business filings, or liquidation notices, which track formal legal proceedings rather than financial distress reported by lenders.
BCI Central focuses on industry insights and project activity, which may highlight construction risks differently from financial data alone.
2. Variations in Reporting Periods
Centrix provides monthly credit reports, which reflect real-time credit activity and can change rapidly.
Some external sources report quarterly or annual figures, which might lead to discrepancies due to different timeframes.
Government statistics (such as from the Companies Office) may lag real-time data, as business liquidations take time to process and record.
3. Definition and Classification Differences
Credit Defaults vs. Liquidations: Centrix tracks credit defaults, which happen when a borrower misses payments for 30+ days. However, not all defaults lead to company liquidations, and not all liquidations result from credit defaults—some are due to voluntary closure, legal disputes, or operational failures.
Industry Classification: Some reports group businesses differently. For example, a logistics company might be counted under "transport" in one report but "freight and warehousing" in another.
4. Sampling Bias and Coverage
Centrix does not track all businesses, only those with credit exposure. Some smaller firms or businesses operating on a cash basis may not be reflected in their data.
Government sources track all registered businesses, including those that don’t use external financing, leading to different totals.
5. Economic Context and Interpretation
Some reports may interpret the same data differently. For example, a 7% increase in mortgage arrears might be framed as moderate stress by Centrix, but a warning sign of financial instability by analysts at Interest.co.nz.
Final Thoughts
While these differences can make direct comparisons difficult, they also offer a more complete picture when viewed together. The key is to look at trends over time rather than focusing on exact numbers from any single source. If a variety of reports show increasing defaults, higher liquidations, and financial stress in certain sectors, that suggests a broader economic challenge, even if the exact figures differ.
Where to Go for Help if You're in Financial Difficulty
If you’re experiencing financial hardship, it’s important to seek help early rather than waiting for things to escalate. Many organisations in New Zealand offer free, confidential support to help individuals manage debt, negotiate with lenders, and find long-term financial solutions. Whether you're struggling with mortgage repayments, personal loans, or everyday expenses, reaching out to financial mentors or advocacy groups can provide guidance and relief.
Below are some key resources available to New Zealanders facing financial difficulty:
MoneyTalks – A free national helpline providing financial mentoring and budgeting advice.
Website: www.moneytalks.co.nz
Phone: 0800 345 123
Email: help@moneytalks.co.nz
Text: 4029
Debtfix – Specialises in hardship assistance, debt consolidation, and financial recovery.
Website: www.debtfix.co.nz
Phone: 0800 332 834
Citizens Advice Bureau (CAB) – Offers free, confidential advice on financial rights and services.
Website: www.cab.org.nz
Phone: 0800 367 222
Sorted – A government-backed resource providing budgeting tools and financial literacy support.
Website: www.sorted.org.nz
Community Law – Provides free legal help for debt-related issues.
Website: www.communitylaw.org.nz
St. Vincent de Paul Society – Offers financial advocacy and support.
Website: www.svdpak.org.nz/advocacy/
Seeking help is a proactive step towards financial stability, and these organisations can assist in developing a plan tailored to your situation.
At Scores4All, we believe that banks, utilities, telcos, and financial services organisations have a crucial role to play in proactively supporting customers who may be experiencing financial distress. The rising arrears and financial hardship figures highlight just how tough things are for many New Zealanders, yet too often, struggling customers don’t know where to turn or how to start the conversation with their creditors. Rather than waiting for missed payments to escalate, we’d love to see more organisations taking the initiative to reach out early, offering flexible solutions, hardship support, and guidance before financial difficulties spiral out of control.
By using data-driven insights, businesses can identify customers at risk, personalise their approach, and provide meaningful assistance—whether that’s adjusted repayment plans, financial education, or connections to support services. A proactive, compassionate approach not only reduces financial stress for individuals and families, but also benefits businesses by improving repayment rates and long-term customer relationships. In challenging times like these, empathy and early intervention can make all the difference.
Discover how Scores4All can empower your team to proactively support customers in need. For a confidential discussion on how we can help you make a real difference, reach out today—we’d love to connect.
Bibliography
Below is a list of sources referenced in this article, along with their web links for further reading:
Centrix Credit Indicator Report, January 2025 – Provides insights into consumer arrears, mortgage stress, and business credit trends.
CoreLogic NZ – Housing Market Update (December 2024) – Analyses home value trends and regional price fluctuations.
QV House Price Index – Market Trends & Regional Insights – Reports changes in New Zealand’s median house prices.
NZ Herald – Housing Market Report & 2025 Predictions – Discusses recent housing market movements and expectations.
Reserve Bank of New Zealand – Debt-to-Income (DTI) Restrictions – Details on the DTI rules introduced in July 2024 and their expected impact.
Fitch Ratings – New Zealand Mortgage Lending & DTI Caps – Provides expert analysis on the effect of DTI limits on lending.
Interest.co.nz – Business Credit Defaults & Liquidations – Reports on the rising number of business failures across key sectors.
BCI Central – Risks & Opportunities in New Zealand’s Construction Industry (2025) – Examines financial pressures on the construction sector.
MoneyTalks – Free Financial Advice & Support – A national helpline for financial mentoring and debt management.
Debtfix NZ – Debt Consolidation & Hardship Support – Assists individuals in financial distress with debt solutions.
Citizens Advice Bureau (CAB) – Financial Help & Consumer Rights – Provides free, confidential guidance on financial and legal matters.
Link: https://www.cab.org.nz
Sorted – Financial Planning & Budgeting Tools – A government-backed resource offering financial literacy support.
Community Law – Legal Assistance for Debt Issues – Offers free legal help for people struggling with debt.
St. Vincent de Paul Society – Financial Advocacy & Support – Helps individuals manage financial hardship.
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