New Zealand facing ‘pockets of stress’ as Kiwis ‘tested by higher debt servicing burdens’, Reserve Bank warns

Amid rising inflation, the Reserve Bank has aimed to rein in spending by aggressively raising interest rates. The official spot rate is 5.5 percent, but there are predictions that it could go even higher.

“New Zealand households and businesses continue to face higher debt burdens, with the proportion of mortgages in arrears increasing from low levels,” the RBNZ said in its report.

Data shows 11.7 percent of New Zealanders are behind on their debt repayments – 10 percent on an annual basis.

In addition, 1.25 percent of mortgage accounts were delinquent, according to credit reporting company Centrix.

The RBNZ said higher interest rates are impacting borrowers and “areas of stress” are likely to increase “over the medium term as highly indebted households continue to be challenged by higher debt burdens”.

With New Zealand’s economy expected to show sluggish growth in the short term due to higher interest rates, the RBNZ warned this would “cause more financial distress for some borrowers”.