Record low interests rates and a heated property market have caused consumer credit limits to grow by 40 percent in the past year.
Credit cards account for 6.8 percent of the country's credit limit, with mortages by far the largest proportion, at 90 percent. Photo: 123RF
Data out from credit bureau Centrix shows the total credit limit for New Zealanders increased by $28 billion to $306bn, more than three times the government's net debt.
Credit limits are a measure of how much debt a person, business or a government can borrow and pay back.
"The increase in our credit limit has been driven by renewed consumer confidence and record low interest rates, which has seen increasing numbers of Kiwis become more comfortable with borrowing," Centrix managing director Keith McLaughlin said.
Mortgages accounted for nearly 90 percent of the country's credit limit, followed by credit cards at 6.8 percent and personal loans at 3.3 percent.
"Over the past year we have also seen a surging property market, which has accelerated mortgage lending as increasing numbers of New Zealanders take on larger mortgages to purchase a home," McLaughlin said.
Other forms of debt such as buy now pay later services, instore credit, and vehicle financing made up the remaining 0.7 percent.
"Of course, larger credit limits are skewed towards those who are most likely to be in work and have a mortgage," he said.
As credit limits increased, personal and household indebtedness would follow, he said.
However, the days of cheap cash appear to be numbered as a number of economists have brought forward their forecasts on when interest rates are expected to rise, as the strength of the economy continues to surprise.
"This could place pressure on those consumers who are highly indebted, although responsible lenders do factor the likelihood of higher interest rates into their lending decision," McLaughlin said.
He said it was important that consumers considered the increased cost of servicing debt, as interest rates fluctuate.