How Much Do I Need to Earn to Avoid Mortgage Stress?

Canstar has crunched the numbers on how much you need to earn to avoid mortgage stress.

More and more home owners are facing the prospect of mortgage stress, which is defined as having to spend over a third (33%) of pre-tax household income on mortgage repayments.

In January 2022, the average two-year fixed rate for owner-occupiers on Canstar’s mortgage database was 4.38%. At time of writing (10/01/24), the same rate is now 7.12%. This means that if you’re coming off a fixed rate in the next couple of months, your repayments will increase significantly.

For an average NZ mortgage of around $369k at 7.12% (principal and interest on a 25-year term) the monthly repayments are $2636 per month, which is $610 more than the repayments ($2026) on a similar sum at 4.38%.

But, of course, the national average Kiwi mortgage is only a statistic. House prices vary from region to region, around 20% of borrowers are first home buyers, and each household has a different income level and mortgage debt.

So to delve a little deeper into the nation’s mortgage stress numbers, Canstar’s research team crunched the numbers region to region.

Mortgage Stress: Region to Region

Canstar’s latest research shows Auckland households need to earn a whopping $240,279 to be able to afford an median-priced house ($1,052,000) and repay the mortgage at current rates without going into mortgage stress.

Given that this is over $90,000 more than the average Auckland household income, it means new homeowners will face mortgage stress unless they can save considerably more than a 20% deposit, or set their sights on a cheaper home.

The next most expensive regions in terms of mortgage stress are Tasman and Bay of Plenty, and, overall, across the motu, the average household faces a shortfall of around $50,000 in the annual income needed to purchase a median-priced home. Only three regions – Gisborne, Southland and West Coast – deliver numbers in the black.

Here’s the full round-up, region to region, of what you need to earn to avoid mortgage stress when purchasing a median value home:

Annual Income Needed to Afford a Property in Each Region

Region Median House Value Deposit (20%) Monthly Repayment Average Annual Before-Tax Income Before-Tax Income Needed to Avoid Mortgage Stress Difference
Auckland $1,052,000 $210,400 $6013 $148,304 $240,279 -$91,975
Tasman $825,000 $165,000 $4715 $108,160 $188,411 -$80,251
Bay of Plenty $815,000 $163,000 $4658 $116,324 $186,134 -$69,810
New Zealand $790,000 $158,000 $4515 $132,496 $180,419 -$47,923
Wellington $787,000 $157,400 $4498 $156,624 $179,740 -$23,116
Waikato $760,000 $152,000 $4344 $123,916 $173,586 -$49,670
Canterbury $700,000 $140,000 $4001 $121,680 $159,880 -$38,200
Hawkes Bay $680,000 $136,000 $3887 $127,972 $155,325 -$27,353
Northland $672,000 $134,400 $3841 $105,196 $153,486 -$48,290
Marlborough $670,000 $134,000 $3829 $108,160 $153,007 -$44,847
Nelson $650,000 $130,000 $3715 $108,160 $148,451 -$40,291
Otago $650,000 $130,000 $3715 $119,704 $148,451 -$28,747
Taranaki $565,000 $113,000 $3229 $119,392 $129,031 -$9,639
Gisborne $560,000 $112,000 $3201 $127,972 $127,912 +$60
Manawatū–Whanganui $530,000 $106,000 $3029 $115,752 $121,039 -$5,287
Southland $430,000 $86,000 $2458 $108,264 $98,222 $10,042
West Coast $399,500 $79,900 $2283 $108,160 $91,229 $16,931
(The analysis assumes a house purchased in today’s market, with a 20% deposit. Source: – 10/01/2023. Median House Price per REINZ (December 2023). Monthly repayment assumes principal & interest repayments for the fixed rate over a total loan term of 25 years, based on the average owner-occupier 2-year fixed rate of 7.12% (based on loans available for $500,000, 80%LVR, and principal & interest payments in Canstar’s database; excludes special condition loans). Average 2023 household incomes source: StatsNZ.

How do you know if you are in mortgage stress?

While the basic rule of thumb for mortgage stress is having to spend over a third of your pre-tax household income on mortgage repayments, it’s not always as simple as the 33% mortgage-to-income ratio implies. It doesn’t take into account some benefits of paying more into a home loan, nor does it work for all income levels.

For example, a high-income household may choose to spend significantly more than 30% cent of household income on their mortgage and still have more than enough money after housing costs to pay for their other expenses.

Signs you may be facing mortgage stress include:

  • You live pay cheque to pay cheque and struggle to pay bills and your mortgage on time
  • You’ve recently lost your job or are facing redundancy
  • You’ve had to borrow money, take out a personal loan or use credit cards to cover ordinary expenses
  • Your mortgage is interest only and you don’t have much equity in the property
  • Financial stress is impacting your personal life, mental health and/or relationships

What can you do if you are in mortgage stress?

If you are in financial strife, consider taking advantage of free financial counselling services. These services can help you make a budget, as well as go through your current spending habits. Are there subscriptions, memberships, and recreational costs you can cut back on? Can you change your phone, broadband or electricity provider to get a better deal?

Related article: Lowest Mortgage Rates in NZ

Another option, if you are in mortgage stress, could be to talk to your lender. They might be able to suggest ways to make loan repayments more manageable, even if it is a temporary change, such as:

  • Reducing repayments to the minimum amount: it could be possible to reduce your repayment amount, or to change the frequency of payments. Speak to your lender.
  • Access excess funds in the home loan: if you have an offset account, it could be possible to use these extra funds for repayments. However, this could increase the term of your loan and the amount of interest you may have to pay. If you have a redraw facility, it could be possible to withdraw some funds to cover repayments. Check the conditions of your loan.
  • Ask for a repayment holiday: while pausing your repayments for a few months can provide a breathing space to fix your finances, it will also increase the amount of money you pay in interest over the term of the loan.
  • Swapping to interest-only repayments: it’s a good idea to find out if there are any fees or charges related to this option.
  • Stay with your lender, but restructure loan: other options could include staying with a principal-and-interest loan, but restructuring it, such as by extending the loan period, or switching to a better interest rate. However, it pays to check what fees and charges may apply to any loan changes, and extending your loan could cost you more in interest over the term of the loan.
  • Refinance with a new lender: another option could be to refinance – to look for a different lender offering a more competitive interest rate. If you’re paying more interest than you need to, that could be causing unnecessary stress. However, it’s important to keep in mind there could be fees and charges associated with refinancing with another bank. There could also be break fees charged by your bank if you want to swap lenders. You may want to consider all possible costs, as well as any benefits of refinancing, before making a decision.

Mortgage Stress: Shop Around

As you can see from our analysis, it’s tough in today’s market to avoid mortgage stress. Spending over 33% of a household’s income on a mortgage creates all sorts of other pressures, including not being able to afford other bills and maintain general wellbeing. This is why it’s always important to shop around and open discussions with banks and lenders to try to achieve the best possible deals.

Compare with Canstar for the Cheapest Mortgage Rates

However, while low interest rates are important, when looking for the best mortgage, you do need to look at more than just interest charges. When Canstar compares and rates mortgages and mortgage lenders, our expert researchers look at each home loan and awards points for the array of features it offers and its comparative price, which includes rates and fees.

The best products then receive our 5-Star Ratings for Outstanding Value. We place a lot of importance on our ratings, which is why the comparison grids below are sorted first by Star Rating, highest to lowest. However, if you want to compare by lowest rates instead, just click through to access our full mortgage rate comparison tables.

Best Mortgage Rates for Refinancing

The table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for home owners looking to refinance. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.

Compare Cheapest Home Loan Rates

About the author of this page

Bruce Pitchers

This report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.

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