High debt levels and an exceptional interest rate environment will soon trip home buyers vulnerable to interest rate rises.

With interest rates at their lowest levels since the 1960s, experts are warning that home buyers with high debt levels could be lulled into a false sense of security, borrowing more money and saving less.

The earlier-than-expected economic recovery has not rectified New Zealanders' high debt burden, says Mark Brighouse, managing director of Brook Asset Management, and now people are out there buying houses again while floating interest rates are abnormally low.

But rates inevitably rise. The Reserve Bank on Thursday indicated it will begin raising the 2.5 per cent official cash rate from around the middle of next year. Fixed rates have risen already almost 2 per cent from their lows earlier this year, and will continue to climb.

"The longer we go in the meantime with people borrowing money and getting used to floating mortgage rates in the mid-fives, the greater the problems when they start to rise rapidly," Brighouse says.

He says it is too late for homeowners to prepare for higher rates by fixing their mortgage, because "for many people, you're unable to lock in the good deal you're getting on variable rates - the horse has already bolted in terms of fixing."

The important thing is not to worsen the situation by running up more debt while the current interest rates are low, Brighouse says.

"But New Zealanders are not thinking like that. They're hearing the recession is over, and it's back to the normal behaviour of spending more than you earn."

Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, estimates New Zealanders' debt-to-income ratio at 151 per cent. He says we haven't had much of an adjustment to household debt or house prices, and when interest rates rise, housing market activity could fall back to its lows of last year.

Interest rates have a large bearing on prices, says Brighouse. "It will get tougher for Kiwis to afford houses, and the current spring fever we are seeing might not last long."

Other economists have pinned housing market hopes to positive migration, but this has mostly been down to less Kiwis leaving the country, and Eaqub thinks Australia's brighter economic outlook could spark an exodus again.

Another threat is that unemployment lags economic cycles, and Eaqub says unemployment will peak late next year or early in 2011 at around 8 per cent from 6 per cent currently.