Kiwis will turn to credit if RB raises rates: D&B

Wednesday 21st July 2010 3 Comments

Over a third of kiwi households will have to use credit to pay for otherwise unaffordable expenses if the Reserve Bank increases interest rates in the coming months, according to a Dun & Bradstreet survey.

The Australasian debt collection and credit information company's consumer credit expectations survey, which focuses on New Zealanders' Sept. 2010 quarter expectations for savings, credit usage, spending and debt performance, also indicates that 18% of households expect their debt levels to increase during the third quarter of the year.

Concerns about rising interest rates appears to be steering New Zealanders away from new credit applications, with less than 10% of households intending to apply for a credit card, home loan, personal loan or credit limit increase on an existing account.

Dun & Bradstreet NZ general manager John Scott said it appears that some New Zealanders have failed to learn important lessons from the global credit crisis, with the survey revealing positives and negatives.

"Consumers are concerned about the impact of rising interest rates on their finances and consequently many consumers are steering away from new credit applications," Scott said.

"However, many New Zealanders are expecting a need to pay expenses on their credit card and some of these individuals are planning to make significant purchases which will be funded using credit or interest free deals. It is clear some consumers are finding it tough making ends meet, while for others, it appears that consumer conservatism has fallen by the wayside and a return to a credit fuelled lifestyle is on the horizon."

Two groups that are not showing as many signs of financial stress, young people and men, have significant intentions to spend in the Sept. quarter. Thirty one percent of those aged 18-34 plan to make a major purchase, a figure that is five percent higher than middle aged kiwis. Meanwhile, 33% of men and 23% of women intend to make a significant purchase during the same time.

Scott said that traditionally young people have been the group which has demonstrated a lack of understanding about appropriate credit behaviour, though the latest survey demonstrates a trend within this demographic to be more cautious with debt.

Forty four percent of 18-34 year olds indicated they may have extra funds in the coming months, compared to 33% for 35-49 year olds and29% for 50+.

"In addition, 53% of the 18-34 year olds indicated they will save the funds, while just 13% in this group said they would spend the money," said Scott.

"We began to see a trend towards better financial management when the credit crisis was in full swing. However, the latest results indicate that for some groups this shift appears to be a long term move. This is a very positive sign and we'd hope to see it continue once the global economy is performing well and people are feeling much more secure about their finances."

Businesswire.co.nz

Comments from our readers

On 21 July 2010 at 4:31 pm Christopher said:

What %age increase are D&B talking about? If .25% makes that much difference to a third of households then most of that third are already knee deep.

On 22 July 2010 at 7:45 am arty said:

Bull - most households with credit cards try to use them for rewards, not because they need to. The lenders take the risk, not NZ as a whole. Low interest rates encourage real estate investment, which is funded mostly by debt and non productive, Thats bad for NZ one many fronts.

On 22 July 2010 at 11:08 am Viv said:

Arty is out of touch. Some use them for rewards but they pay the total owing each month and do not incur any interest at all. The ones of concern are those only paying the minimum payment each period. They are the people who are paying through the nose for their purchases. I have seen this situation time and time again! It is a revolving wheel with no way off!