Credit approvals for mortgages and consumer credit continued to be negatively impacted by changes in credit rules.
The latest credit data from Centrix shows that lending has become more restrictive since amendments to the Credit Contracts and Consumer Credit Act (CCCFA) came into effect in December, with the number of approvals rising. decreased further in February.
The drop in credit approvals may have been reflected in the value of new residential mortgages being put in place. They fell 21% in January from a year earlier, with nearly $1 billion in loans reduced.
Centrix Managing Director Keith McLaughlin said: “December fell because of, we think the CCCFA, but that trend has continued and it’s probably about 5% lower as a conversion rate per compared to what it would not normally be”.
“Our data shows that the proportion of mortgage applications resulting in an approval fell to 34% in February, while conversion into consumer credit fell from 35% to just 28% of applications,” the Centrix report said. .
McLaughlin said people with high credit scores were the most affected by the CCCFA, because those with low credit scores would have been turned down anyway.
“What we’re seeing now is that with a second hurdle, which is determining affordability, some of those people who would have passed the credit risk component, are now being thrown off the affordability ladder. “, did he declare.
Regardless, credit demand remained flat last month, partly due to a drop in business and consumer confidence, but also a drop in the number of credit checks.
“The rate of decline may be larger than we can see, as we know some lenders have chosen to assess affordability before performing a credit check,” the report said.
McLaughlin said backlogs were also on the rise, with increases across all regions, although it’s too early to tell if this was a trend.
“Despite rising interest rates, mortgage arrears remain low, thanks to the large number of fixed mortgages.
“However, it is inevitable that rising rates will eventually put more pressure on households who are also facing rising inflation.”
The number of consumers and businesses in arrears was up, but consistent with historic levels, he said.
Business and consumer credit arrears levels increased in all regions in January.
About 400,000 consumers are currently in arrears with personal loan arrears being particularly high.
Corporate defaults rose 4% in February as Omicron, and ongoing border and capacity restrictions continued to challenge the construction, hospitality and retail sectors .
“The retail sector is one of the hardest hit, with delinquencies up 24% year-over-year,” the report said.
“The impact of this wide range of market forces means it’s more important than ever for businesses to take proactive action and manage their credit risk in this highly volatile credit environment,” McLaughlin said.