Households’ borrowing returns to pre-COVID levels

by Roxanne Libatique14 Nov 2020

Kiwis continue to recover financially from the impacts of the COVID-19 crisis, with households now back to borrowing levels the same as before the pandemic, according to credit reporting bureau Centrix.

When New Zealand went into lockdown due to the pandemic, borrowing was mostly limited to households in dire straits and those with low credit ratings.

Now, the latest data from Centrix has revealed that people with higher credit scores are borrowing again, and the value of new loans in September increased by 16% compared to the same month last year.

“Across the board, people are out there spending money. There’s confidence in the market, not just in the housing market, but for spending on luxury items,” said Centrix managing director Keith McLaughlin, as reported by Stuff.

Read more: Near Prime Loans 101 with Pepper Money

The Reserve Bank of New Zealand (RBNZ) said in its monetary policy statement last week that economic activity had proved “more resilient than earlier assumed” at the time of its monetary policy statement in August.

McLaughlin said payment deferral deals allowed homeowners financially impacted by the pandemic to reduce their repayments temporarily or suspend them entirely. However, he warned that there were people who had come off repayment deferral deals only to fall behind on their repayments quickly.

“Payment deferrals that have resumed repayments have arrears levels that are more than double that of non-deferrals. Debt stress will continue to emerge for these impacted consumers well into 2021,” McLaughlin said.

At the end of October, Centrix had 39,000 home loans flagged on its system as having payment deferrals in place – with eight in 10 of them being for home loans.

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