Kiwis need to act now, with interest rates low, to avoid carrying crippling burden into retirement, bank says.

Young New Zealanders are being urged to take advantage of low interest rates to reverse the trend towards remaining saddled with debt after 65.

The Bank of New Zealand has disclosed research that finds almost one in three homeowners will be older than the traditional retirement age before they throw off the shackles of a home mortgage.

That is in stark contrast to the dreams of many younger householders, who expect to be mortgage-free well before then.

BNZ retail and marketing director Craig Herbison fears it raises the spectre of "intergenerational debt" rather than older Kiwis bequeathing wealth to their children.

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Although an online survey of 1002 people aged over 18 for the bank found about 60 per cent expected to keep working past retirement age, almost half said it would be by choice.

Working part-time to keep busy and active was the intention of 48 per cent of those canvassed by research firm Colmar Brunton, while 36 per cent hoped to remain in fulltime employment for that purpose.

But Mr Herbison said yesterday it was alarming how many feared they would have to keep toiling to maintain their standard of living.

The survey found 31 per cent in that category, and 15 per cent who expected to have to keep working to meet mortgage repayments.

Optimism was strongest among young homeowners, with 50 cent of those aged under 30 expecting to put their mortgages behind them by the time they turned 50.

The cold reality was that the median age for clearing mortgages for those aged 50 to 64 was likely to be 66, based on current projections.

Mr Herbison said it was great that many Kiwis wanted to work past 65.

"But we want to make sure people have the retirement they want, not the one they are forced to have," he said. "We're very optimistic in our younger years, but we're forced to shift the goalposts as we get older."

He believed a major factor for lingering indebtedness was that people were staying in education for longer, and putting off buying their first homes and starting families in favour of paying off student loans.

"People are forming relationships later, and getting into their first home in their 30s rather than 20s - and if you extrapolate a 25- or 30-year mortgage, that means you are in debt until your 60s rather than 50s."

But Mr Herbison said current low interest rates offered a valuable opportunity for homeowners to try to accelerate repayments and reduce the duration of their mortgages.

"There hasn't been a better chance since the 1960s to get ahead and pay off your home loan faster," he said.

He said mortgage-holders could knock years off their loans by increasing repayments by just $14 a fortnight - the equivalent of three coffees.

But older Aucklanders are likely to be slighter better off in retirement than their counterparts elsewhere, with 27 per cent not having to reduce their spending, compared with a national figure of 26 per cent.

Even so, that is twice as high as the 13 per cent of non-retired Aucklanders expecting to have to curb spending in their dotage, and 12 per cent of younger New Zealanders.

He cautioned Aucklanders against putting too much store on "downsizing" their homes to pay for retirement, saying retaining a mortgage would reduce what would be left after buying a smaller property or a unit in a retirement village.

Debt-free by 65 is couple's ambition

Chris Ratcliffe and Morgan Bailey are first-home buyers who hope to be mortgage-free well within retirement age. Photo / Supplied
Chris Ratcliffe and Morgan Bailey are first-home buyers who hope to be mortgage-free well within retirement age. Photo / Supplied

Chris Ratcliffe and Morgan Bailey expect to be shot of their mortgage well before turning 65, by pouring as much as possible into repayments while they can.

The Auckland couple, aged 32 and 26 respectively, moved into their first home in June after putting seven months of "sweat equity" into renovating the Whenuapai property.

They are also taking advantage of having two incomes - while they delay marriage and children - to boost their financial stake in the house with accelerated repayments calculated against a 25-year term.

"It was going to be 30 years, but we threw a bit more at it than we thought we could," said Ms Bailey, a public relations consultant who cites a retirement industry client for her awareness of the importance of early financial planning.

"We have stretched ourselves to do it, sacrificed a lot of other things," she told the Herald yesterday.

"I'm aware of what it costs to retire in comfort - probably more than a lot of people my age."

One big sacrifice will be waiting to start a family, given that most of her income is going on monthly mortgage repayments of $3400.

That represents a monthly increase of about $150 on what it would cost to service a 30-year loan.

"But if it takes five years off your mortgage, that's huge. It will be quite some time before we have kids because if I'm not working, that's our whole mortgage payment."