Lee Potter, like many homeowners, is cutting back as much as he can. Photo / Herald on Sunday

Lee Potter, like many homeowners, is cutting back as much as he can. Photo / Herald on Sunday

Soaring interest rates will see Kiwis fork out almost a billion dollars extra in mortgage payments this year.

GE Money home lending director John Grant said an average interest hike of two per cent will affect about $45 billion of home loans rolling off fixed rates - a total of about $900 million.

The revelation comes as housing affordability continues to fall.

The latest quarterly report by Massey University's Property Foundation shows a 6 per cent decline in the past year.

And financial pressure is being felt even by high earners, with one budget service giving food parcels to a family with a six-figure household income.

Grant predicted the increase in interest rates would cause more misery for cash-strapped Kiwis and warned unexpected changes in income could see some lose their homes.

"It's one heck of a lot of money being channelled out of the pocket," Grant said.

"It's not just those with 100 per cent loans. They could have borrowed 60 per cent and be facing exactly the same predicament."

Banking industry experts estimate there are about 600,000 mortgages in New Zealand.

Based on that figure, senior analysts say about $155b is owed, with the average mortgage about $250,000.

That's a massive jump from 10 years ago when there was $56b in mortgage debt with an average of about $100,000.

The change is hurting huge numbers of average Kiwis with mortgages, among them first-time owners Lee Potter and Lori Clearwater.

The west Auckland couple both work 50 hours a week, with a combined annual income of $120,000, but are crippled by weekly mortgage payments of over $900 for a $375,000 house. Starting a family is out of the question, while holidays, Sky TV and a social life are also off the agenda, as the couple budget down to the last dollar.

They are weighing up a move to Australia where, even if they lost money on the sale of their home, Potter estimates they could double their income and quickly end up better off. Sick of forking out "dead money" in rent, the couple approached banks for a 100 per cent $375,000 loan when the Sunnyvale house next door to Lori's mum came up for private sale.

"They welcomed us with open arms. We were quite surprised when they said we qualified," says Potter, an engineer.

"We would have needed a $32,000 deposit and it was just too hard to try to save that amount."