Banks foreclosed on more than 700 properties in the last year when financially strapped homeowners could no longer afford repayments.
While the number of mortgagee sales has plummeted, an economist warns those who extended their mortgage terms or took repayment holidays during the last recession could be exposed during the next downturn.
Figures released exclusively to the Herald by data analysis company CoreLogic show 95 properties defaulted in the first quarter of 2015 and 723 in the year to March 31.
In comparison, 198 foreclosures occurred in the previous three-month period and 1133 properties defaulted in the year to March 2014.
Experts say the fall in mortgagee sales reflects strengthening economic conditions, solid employment figures and near record-low home loan interest rates, making it easier for homeowners to afford repayments.
The Reserve Bank's LVR restrictions on mortgage lending to borrowers with less than 20 per cent deposit are also credited with preventing home buyers taking on excessive debt.
However the head of Auckland's biggest real estate firm confirmed the risk of a market correction last week in response to spiralling house prices with the possibility of some people losing their homes.
Barfoot & Thompson director Peter Thompson said there was potential for prices to fall back after a period of unprecedented growth.
But he believed most homeowners would ride out any downturn until prices stabilised.
Ninety-seven Auckland foreclosures occurred in the past year, compared with 294 in the previous 12-month period - a fall of more than 50 per cent.
Eleven of the country's 14 regions recorded fewer mortgagee sales in the last year. Only Tasman-Nelson-Marlborough (up 14 to 25); Otago (up 3 to 27); and Southland (up 11 to 31) saw year-on-year increases.
Mr Thompson wants anyone buying properties worth over $1.5 million to pay deposits of up to 35 per cent to ensure people purchase homes they can afford and limit their exposure once interest rates start to rise.
Bankers Association chief Kirk Hope said suggestions people were buying properties they could not afford implied banks were lending irresponsibly.
"I would challenge that. Banks have taken a responsible approach to lending into this market. The last thing a bank would ever want to do is get involved in a mortgagee sale."
When banks assessed loan applications they based their decision not on current interest rates, but on a "buffer" of 200 basis points, or a 2 per cent rise, "which in the current market you're talking about a 35 per cent movement, so that's a fairly sharp increase".
Mr Hope said "minor interventions" like deposit thresholds would not address the key problem facing Auckland's property market - surging demand combined with a severe shortage of housing.
New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said even when mortgagee sale numbers were high during the global financial crisis, New Zealand did not have the same default rate as the United States, where homeowners could "post back the keys" if their property's value collapsed.
"You can't walk away from your mortgage [here]. We just knuckle down and do nothing.
"We've used up a lot of headroom and fat in the system during the last recession so if there's another downturn those people who used up that bread ... will be exposed."
• 723 nationwide in year to March 31, 2015 - a 56 per cent drop.
• 95 in first three months of 2015 compared with 198 in last quarter of 2014.
• 97 Auckland properties defaulted in the past year compared with 294 in the previous 12 months.
• The fall in foreclosures attributed to New Zealand's strengthening economy, strong jobs market and near record-low interest rates.