One in 10 Kiwis are behind on their debt repayments, the highest level in four years, according to new data.
Credit reporting company Centrix released its latest report overnight for the month of June, showing 11.7 percent of indebted people were in arrears.
Economist Cameron Bagrie told AM on Tuesday financial stress will no doubt rise over the next 1-2 years, with the turning of the credit cycle.
"At the moment - are we seeing a lot of stress? I'd say no. But is it heading in the wrong direction? I'd say yes."
Banks have about $500 billion worth of loans on their balance sheets, he said, about 0.5 percent of which is now classed as non-performing - meaning loans that are repaid late, or unlikely to be repaid at all.
"That's incredibly low," he told AM host Laura Tupou, compared to the GFC when non-performing loans were above 1.0 percent.
But it seems like it's on the rise.
"Once again the direction of travel is north."
Centrix's latest report showed 10 percent of people were behind on repayments for unsecured personal loans, while 10.4 percent of buy now, pay later users were behind.
Also, 1.32 percent of New Zealand mortgage accounts were overdue - a big jump.
Bagrie said Kiwis tend to manage larger financial products like mortgages "pretty well", but warned stress will rise as $170 billion of mortgages get refinanced over the next year.
People will go from rates of 2-3 percent, "then welcome to 6-plus [percent]."
Corporate credit stress is rising rise too, he argued, because they're making less money and therefore paying less tax.
"Some of that's giving back extraordinary profit levels, but we're seeing transaction balances across businesses are starting to decline - for the last 18 months."
In terms of businesses not doing so well, liquidations jumped 35 percent from the same time last year.
But "once again, we're coming off real low levels of stress".
The Reserve Bank is aiming to curb spending in order to tame inflation, which sits at an annual rate of 6.7 percent.
The OCR currently sits at 5.5 percent - but it won't be going any higher, Reserve Bank Governor Adrian Orr said in May.
Inflation has soared around the world over the past 2 years, with the United Kingdom sitting at 8.7 percent, and Australia at 5.6 percent, following the onset of the COVID-19 pandemic.
That has caused central banks in most major economies to hike interest rates at a pace unseen for decades.
ASB and Kiwibank raised some of their fixed home loan rates on Monday, as well as hiking their deposit rates.
"So one is offsetting the other," Bagrie said.
He told AM prices are continuing to rise around the world, which will keep affecting interest back home too.
"The more sticky, elevated and persistent inflation is, the more that central banks will start to talk about lifting interest rates," he said, especially longer-term ones.
