Housing affordability has declined over the past two years despite mortgage rates falling to their lowest levels since the 1960s.

Statistics New Zealand's household economic survey found that total housing costs as a proportion of household income increased from 15.1 to 16 per cent over the two years since June 2009.

Housing costs include rents and mortgage payments, rates and building-related insurance. They absorb a higher proportion of incomes in Auckland than in other regions - 18.8 per cent in the latest year, up from 16.1 per cent two years earlier.

The proportion of households nationwide who spend 30 per cent or more of their income on housing rose from 19.5 per cent to 21.8 per cent over the past two years.

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Average spending on housing rose 6.8 per cent to $248.20 a week over that period, while average household incomes rose just 1.5 per cent. Average rents, for the 35 per cent of households that pay rent, rose 6.6 per cent over the two years.

Local body rates outstripped income growth even more, rising 9.3 per cent.

But mortgage payments, for the 31 per cent of households which have mortgages, fell slightly (1.8 per cent) from $376 a week to $369.

This reflects a decline in mortgage interest rates. The current weighted average mortgage rate is 6.17 per cent, compared with 7.05 per cent two years ago.

Among rental households just over half spend 25 per cent or more of their income on housing costs, while 39 per cent spend more than 30 per cent and 23 per cent spend more than 40 per cent.

For owner occupiers the proportions are lower - 18 per cent spend over 25 per cent of income, 13 per cent over 30 per cent and 7 per cent over 40 per cent. In part that reflects the fact that about half of owner-occupiers have paid off the mortgage.

But the Reserve Bank in its Financial Stability Report this month warned that a sharp fall in house prices, combined with a fall in incomes or a rise in interest rates remained a key risk to household balance sheets, which had not truly been tested over the past three years.

House prices fell 10 per cent, peak to trough, from their 2007 high but most of that decline had since been recovered.

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Meanwhile, the ability of indebted households to service debt had been improved by a rise in disposable incomes, slower growth in debt levels and lower mortgage interest rates.

Nevertheless, the median loan-to-value ratio (LVR) had increased from 38 per cent in 2007 to 42 per cent, though the bank noted that that was still below the 54 per cent median LVR 10 years ago.

Households with high LVRs tended also to have relatively high incomes and strong cash flows, it said.

The second highest income quintile, with household incomes ranging from $63,000 to $88,000, had the highest median LVR at 47 per cent, but spent 22 per cent of disposable income servicing the loan, the lowest proportion for any quintile except the highest.

Only 1 per cent of households had an LVR above 80 per cent and a debt-serving ratio over 50 per cent, the bank said.

The 4700 households Statistics NZ surveyed were also asked about the adequacy of their incomes relative to what was required to meet everyday needs, for things such as accommodation, food and clothing.

More than half - 53 per cent - said their income was just enough or not enough to meet to their everyday needs.

Among the lowest income quintile the proportion was 70 per cent, while among the highest quintile it was 28 per cent.

Big cut
16 per cent
housing costs as a proportion of household income

18.8 per cent
housing costs as a proportion of household income in Auckland

21.8 per cent
of NZ households spend 30 per cent or more of their income on housing
Source: Statistics New Zealand