Non-Performing Housing Loans in NZ Reach a 10-Year High Amid Rising Mortgage Stress

Date Published: 1 March 2024

Key Facts

• Non-performing housing loans in New Zealand increased more than 10% in the past month and has now reached a 10-year high.
• Reserve Bank (RBNZ) reports shows that non-performing loans rose by $161 million in January, making the total $1.678 billion.
• The $1.678 billion accounts for 0.5% of the $350.393 billion of outstanding housing loans, the highest ratio since early 2014.
• The rate of mortgage stress is increasing due to significant interest rate rises since the latter half of 2021.
• The total increase in non-performing loans has surged by over 75% in the past 12 months, an increase of $721 million.
• January’s increase was the largest in any month since the pandemic lockdown period of 2020.
• No rate reduction is expected until next year, according to RBNZ this week.
• Not only in housing, but stress is also rising in the total banking system and small-to-medium-sized business sector.
• The RBNZ reported that total banking system non-performing loans rose by $268 million to $3.82 billion in January.
• Non-performing loans for small-to-medium-sized businesses particularly have increased strongly in recent months and have nearly doubled over the past year.

Article Summary

The latest Reserve Bank (RBNZ) of New Zealand data reveals a steep increase in non-performing housing loans, marking a 10% rise in just one month. In numerical terms, non-performing loans saw a hike of $161 million in January alone, taking the total to $1.678 billion. This amount accounts for 0.5% of the total outstanding housing loans that sum up to $350.393 billion, denoting the highest ratio of non-performing loans since early 2014.

While there was a period last year when New Zealand households appeared to be surviving the financial storm, current indications show mortgage stress is on the rise. This surge is significantly due to the massive interest rate increases that have been witnessed since the second half of 2021. Although many homeowners have managed to stay financially resilient during the pandemic, their buffers may be nearing depletion.

The latest increase in non-performing loans means that in the twelve-month period, the total figures have augmented by over 75%, i.e., $721 million. Furthermore, the January increase was the largest monthly increase since the Covid-19 lockdown period in 2020 when distressed mortgage lending figures spiked temporarily.

While the housing sector is witnessing an increased financial strain, it’s not alone. Data shows that overall banking system non-performing loans also increased significantly in January, rising by $268 million to $3.82 billion. The rising stress particularly plagues the small-to-medium-sized business sector, with non-performing loans in this area almost doubling over the past year.

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