Mortgage stress is defined as having to spend over a third (33%) of pre-tax household income on mortgage repayments. This means that high-income households can meet the definition of being in mortgage stress, even though they still have plenty of disposable income after mortgage payments.
In reality, it's median and lower income household budgets that are hit hardest by mortgage stress. So to delve a little deeper into the mortgage stress numbers, Canstar's research team has crunched the numbers on average NZ mortgages and their repayments.
Average home loans and repayments in NZ
The following table shows the average home loans for the purpose of buying a home taken out by first home buyers and other owner-occupiers over the first four months of 2026.
For the repayment figures, we've used the loan repayments on principal and interest, paid monthly over 25 years, using the average 2-year fixed rates on Canstar's database for residential mortgages (5.33%) and SBS Bank's special 1-year fixed FirstHome Combo rate for first home buyers (4.19%).
The third column shows the average before-tax household income needed to avoid mortgage stress on each set of repayments:
Borrower | Mortgage | Repayments | Income |
|---|---|---|---|
First home buyers | $584,533 | $3147/m | $126,000 |
Other owner-occupiers | $318,196 | $1920/m | $77,000 |
Source: RBNZ
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, as we mention above, a high-income household may choose to spend significantly more than a third of its income on mortgage repayments, and still have more than enough money after housing costs to pay for 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?
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.
