Auckland first-home buyers are among the most at risk as the coronavirus crisis threatens to bring job cuts and reduced worker incomes, experts say.
Banks have called on home buyers and small businesses hit by the economic crisis to contact them as early as possible, promising a range of relief measures.
One leading mortgage broker said banks had already shown a willingness to work with customers to reduce their mortgage burdens.
However, fuelling concerns about buyers' ability to pay back loans was the lengths some went to buy during Auckland's recent red-hot housing market as average sales prices soared to $880,000 - close to record levels.
First-home buyers took out $700 million in home loans in January, their highest share of total lending - at 17.3 per cent - since Reserve Bank records began in 2014.
The total $4.05 billion in loans given to all home buyers was also the highest since January 2016.
NZ Chambers of Commerce and Industry chief executive Michael Barnett said scores of jobs could be cut in the coming weeks and it was bound to push some owners to the brink.
"If you look at everyone that becomes unemployed, a high percentage of those will have mortgages and hire purchase and none of those payments go away," he said.
Adding to the trouble ahead was the unprecedented nature of the coronavirus outbreak in the modern world.
Barnett said no one knew exactly how long the crisis would last.
Nick Goodall, head of research with analysts CoreLogic, said banks had earlier put in robust stress testing measures to work out whether buyers could afford to pay home loan repayment rates as high as 7 per cent.
However, this did not test customers' abilities to pay with reduced incomes or if they lost their jobs during the current crisis.
"That is going to be a very real concern for the Government, for the banks and for home buyers, especially those who recently purchased because they are going to have less room to move," he said.
He said the key would be the banks' response.
Forced mortgagee sales were not in the interest of either banks or home owners and it meant banks would likely work hard to help customers, he said.
Bruce Patten, from Loan Market mortgage advisers, said he had been contacted by several airline pilots and small businesses looking for ways to reduce their loan repayments.
One man - who normally had a "really good income" - came saying he'd just had all his business orders cancelled and wanted to know if he could get a three-month mortgage holiday, Patten said.
He said the banks had been "really forthcoming" in such cases.
"Normally I'd have to do a whole application around that, but they are actually allowing us to do it all around email at this stage, summarising the client's position and the need to go to interest only repayments and they are being really accommodating," he said.
However, in cases where customers had lost their jobs, the banks insisted on talking to them in person rather than working through mortgage brokers.
Patten said the banks had set up hardship teams and were all in talks about how to handle the crisis.
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The Bankers' Association urged customers to speak to banks early and said support options included reducing or suspending repayments of home loan debt and instead only repaying the interest on the loan.
Banks would also consider restructuring business loans, providing access to short term funding and referring customers to budgeting services.
Goodall hoped those who did lose jobs could sign up to receive a Government benefit as soon as possible while also having any major repayments temporarily deferred.
The Government recently announced a $12.1 billion coronavirus relief package to help subsidise the wage costs of business affected by the crisis in a bid to keep people employed in their jobs.
The Ministry of Social Development has set up an emergency helpline open from 8am-1am everyday on 0800 779 997.
Individuals needing help should call 0800 559 009 7am-6pm Monday to Friday and Saturday 8am-1pm even if they don't think they qualify for help.
"There may be other options available and we can point you in the right direction," the Ministry said.
On the flip side, auction rooms were still full as Auckland house sales continued to push through despite the coronavirus.
Patten said he had just had a customer buy at auction and another purchase through a private sale.