First-home buyers are being lured into the property market by interest rates that in some cases make it cheaper to own than rent.
But they come with a warning. The Commission for Financial Literacy and Retirement Income is worried that some borrowers - especially first-time buyers and novice property investors - are biting off more than they can chew.
They are also vulnerable to fluctuations in the property market, interest-rate rises or changes to their personal circumstances.
Retirement Commissioner Diana Crossan said people needed to be careful, and agreed that interest rate changes could make a big difference. "The banks want people to take on loans so they are offering large amounts," Crossan said. "It seems like common sense but people need to think 'what happens if' ..."
A $250,000 mortgage on a rate of 5.5 per cent results in payments of $793 a fortnight. But if interest rates return to the historically average 7.5 per cent, the fortnightly repayment becomes $928. The warnings come as record levels of mortgagee sales have been reported.
Crossan said it seemed a lot of people were not giving enough thought to the future. "It's hard for people to remember when interest rates were at 15 or 20 per cent. But people who took mortgages at that time will tell you it can happen."
Other people were increasing their mortgage repayments to pay off their home loans faster, she said. She warned that this should be done in such a way that if circumstances changed - if an income was lost or interest rates rose - repayments could be dropped again.
Sometimes the penalties involved in doing that could be high. "If things change, will their banks allow them to change with them?"
There is evidence that low interest rates and a buoyant market are prompting property investors back into action, particularly in Auckland.
Mortgage broker Campbell Hastie said Auckland's high rents had prompted many first-home buyers to take the plunge into the property market. They were looking at their rent and finding they could afford to buy. Those whose rent was about $400 or $500 a week could find it paid off a mortgage.
He said first-home buyer hotspots included Glenfield on Auckland's North Shore. There, the average rent for a three-bedroom house was $420 a week. The median sales price was about $450,000, which meant fortnightly repayments of about $1122 with a $25,000 deposit.
Banking ombudsman Deborah Battell said she was not aware of complaints about banks being irresponsible in their lending.
Surprise at big loan despite pregnancy
Anna Calver - five months' pregnant and planning to give up work - was told by a broker she could borrow $700,000 to buy her first home in central Wellington.
The figure was based on a $70,000 deposit and Calver and her partner Ben's good incomes.
"I said I thought that was too much and that $600,000 would be the maximum," Calver said.
In the end, the couple found a three-bedroom villa well below that amount. But she said even that mortgage would be a lot of money when they were down to one income for six months.
She worries people could be caught out by more blase attitudes to borrowing prompted by low interest rates. "All the messages you get are about how low interest rates are. They might be low for the next couple of years but when will they go up?"
She said lots of first-home buyers drawn in by seemingly cheap mortgages would borrow as much as they could and leave nothing for other costs that come with owning a home. "And you've got to think about maybe taking time off to have kids."