A record number of buy now, pay later loan account holders are behind in their payments, credit reporting company Centrix says.

At the end of March 10.5% of all buy now, pay later (BNPL) loans were in arrears, Centrix managing director Keith McLaughlin said. “Buy now, pay later is breaking a record every month,” McLaughlin said.

Centrix will launch a service later this month through which BNPL lenders can check to see whether someone trying to open an account is behind in their payments with any other BNPL lender.

The company tracks how well people and businesses are doing in making repayments on loans, and McLaughlin said March showed a continuation of the negative trends of recent months as households came under more pressure from rising mortgage rates, and high inflation. Another 400 households hit mortgage trouble in March, he said.

Mortgage arrears had now risen for the eighth consecutive month, he said. At the end of March 19,300 residential mortgages were in arrears, having missed repayments, he said. That represented 13 in every 1000 mortgages, and was up from 18,900 at the end of February.

That was still a lower proportion of home loans in arrears than before Covid-19 first made its appearance in New Zealand, he said.

McLaughlin said borrowers under financial pressure prioritised which of their loans they paid first. People prioritised their car loans over their BNPL loans as they needed to keep their vehicles to stay mobile, he said. Car loan arrears actually fell in March compared to February, he said.

Rates of arrears on personal loans and credit cards also rose. “In tandem with rising prices, consumer credit arrears also climbed for Kiwi households,” McLaughlin said.

Across the entire “credit active” population of borrowers, 118 in every 1000 were in arrears on one or more of their credit contracts, Centrix reported. That includes not only loans, but power and telecoms accounts.

“Driven primarily by buy now pay later and unsecured personal loan arrears, it’s clear many are feeling the pressure to meet their repayment obligations in the current economic climate,” McLaughlin said.

Under pressure households were also borrowing less. New mortgage application inquiries were 15% down on this time last year, while new BNPL demand was also down 15%. Despite this, demand for vehicle loans, credit cards and personal loans remained up year-on-year, McLaughlin said.

“Looking forward, the next official cash rate announcement at the end of this month has been pegged as another rise by many economists, despite the annual inflation decline to March 2023,” he said.

Source: stuff.co.nz