First home buyers are borrowing an average of around $400k to get on the property ladder and there are concerns about how much is being taken out of KiwiSaver to bulk up deposits.

KPMG's quarterly Financial Institutions Performance Survey, analysed latest Reserve Bank data and found average new mortgage lending jumped to $215,777 in January - up from $198,710 a year earlier.

For first home buyers, the average was $395,257 - down from $404,433 a year earlier - but average borrowing for first home buyers with a deposit of less than 20 per cent rose to $441,640 - up from $411,267 in January 2018.

Low deposit lending made up 40 per cent of all lending to first home buyers.

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"For first home buyers, borrowing $400,000 is quite a large amount, assuming a 20 per cent deposit ($100,000), when the average annual household income before tax was $105,719 for the year ended June 2018," the KPMG report notes.

"Combined with the considerable cost of living, especially in Auckland where the average house price is $800,000 and would require a $160k deposit, more and more New Zealanders are using their KiwiSaver funds to finance their first home."

The report says first home buyer withdrawals from KiwiSaver increased by 6.5 per cent in January to $59.4 million compared to January 2018.

It says conservative estimates suggest around one-third of first home buyer deposits are coming from people's KiwiSaver accounts.

"This trend is possibly due to New Zealanders feeling as if digging into their retirement funds is the only way to get on to the property ladder."

But the report said the impact was not being limited to first home buyers as more people at retirement age were still paying off their mortgage.

Latest household expenditure data shows only 38 per cent of people between the age of 55 and 64 own freehold homes.

The percentage of over 65 years old who have no mortgage on their home has also dropped from 78 per cent in the mid-2000s to a 72 per cent average between 20015 and 2017.

The situation comes as competition heats up between the banks on low mortgage rates.

"After a period of relative calm, the competition for mortgages appears to have heated up," the report noted.

HSBC recently launched a two year home loan rate of 3.69 per cent - the lowest ever fixed home loan rate from any bank to be offered in New Zealand in the last 50 years.

The rate is only available to premier customers - existing customers who borrow an extra $100k or new customers who take out a combined home loan of $500k or put $100k into savings and investments with HSBC.

Kiwibank this week launched a two year fixed rate of 3.99 per cent for those with a least 20 per cent equity and TSB bank has said it will match any one year first home loan rate advertised by the Australian banks.

"With this recent spike in competitive rates being offered after a period of relative calm, customers are benefiting from a long period of low-interest rates.

"However, possibly due to the low-interest rates, more households are having debt secured against their house, with only one-third of homes being mortgage free."