Published: 10 June 2026
Last Updated: 10 June 2026
Author: Murray Greig, Founder of Loansmart
What Are Mortgage Arrears?
Mortgage arrears occur when you fall behind on your home loan repayments. While missing a repayment doesn’t automatically mean you’ll lose your home, ongoing arrears can lead to additional fees, damage your credit history and, if left unresolved, increase the risk of a mortgagee sale.
If you’re struggling to keep up with your mortgage repayments, acting early gives you the greatest opportunity to regain control. Options such as restructuring existing personal loans may help reduce your monthly repayments, improve household cash flow and prevent your financial situation from worsening.
Key Takeaways
- Mortgage arrears occur when you miss one or more home loan repayments.
- According to the latest Centrix Credit Indicator Report, 1.29% of New Zealand mortgages are currently in arrears.
- Early intervention provides more options to avoid further financial hardship.
- Debt consolidation may reduce monthly repayments by combining multiple high-interest debts into a single, more affordable loan.
- Lower monthly repayments can improve household cash flow and help some borrowers stay on top of their mortgage repayments.
- Loansmart compares lending options from multiple New Zealand lenders to help eligible borrowers find suitable debt consolidation and lending solutions.
Mortgage Arrears Are Affecting Thousands Of Kiwis
Although inflation has eased to 3.1% in the year to the March 2026 quarter, many New Zealand households continue to feel the pressure of higher living costs. Housing, groceries, insurance, electricity and transport all remain significantly more expensive than they were just a few years ago.
According to the latest Centrix Credit Indicator Report, 1.29% of New Zealand mortgages are currently in arrears. Based on 2023 Census data showing more than 1.17 million households own their home, this suggests that around 15,000 New Zealand households could be behind on their mortgage repayments at any given time.
While mortgage arrears affect only a small percentage of borrowers, they represent thousands of households under financial pressure. The earlier homeowners seek help, the more options they typically have to reduce financial stress and avoid further arrears.
At the time of writing, Trade Me listed 96 mortgagee sale properties across New Zealand, including 50 in Auckland alone. While mortgagee sales remain relatively uncommon, they are often the final stage of a prolonged period of mortgage stress and financial hardship.
The good news is that a mortgagee sale is generally a lender’s last resort. If you’re experiencing financial pressure, seeking help early may provide more options to reduce your debt, improve affordability and avoid falling further behind.
Real Client Story: How Loansmart Helped a Borrower With $70,000 in Mortgage Arrears
Many people assume that once they’re behind on their mortgage, there are no options left. Mark’s story shows that’s not always the case.
Mark originally contacted Loansmart because he needed finance to purchase a reliable vehicle. As we reviewed his application, we discovered a much bigger problem—he was carrying approximately $70,000 in mortgage arrears after being made redundant twice within a year.
Rather than focusing only on the vehicle loan, our Financial Adviser took the time to understand what had caused the arrears and what Mark’s plan was moving forward. Mark explained that he intended to sell his home later in the year, providing a clear exit strategy. With a full understanding of his circumstances, we arranged a lending solution that did much more than finance a vehicle. The loan was structured to:
- Pay the full $70,000 mortgage arrears
- Clear an existing loan default
- Repay outstanding credit card debt
- Provide funds to purchase a reliable replacement vehicle
To improve affordability, the loan was approved with interest-only repayments for 12 months, giving Mark breathing room while he prepared to sell his property.
Instead of simply approving another loan, the solution addressed the underlying financial issues, helping Mark regain control of his finances and avoid further mortgage stress.
Watch Mark’s story below to see how taking the time to understand a client’s full financial situation can lead to a better long-term outcome.
Read the full case study: Marks Fresh Start After Falling Behind
Read the full case study: Marks Fresh Start After Falling Behind
What Happens If You Fall Behind on Your Mortgage?
Falling behind on your mortgage repayments doesn’t mean your home will immediately be sold.
Most lenders will first contact you to discuss your circumstances and explore possible solutions. The earlier you communicate with your lender or seek professional advice, the greater your chances of finding a manageable solution before arrears continue to grow.
Ignoring the problem can result in:
- Additional interest and default fees
- Damage to your credit history
- Increased financial stress
- Reduced borrowing options in the future
- Mortgagee sale proceedings if no suitable solution can be found
Can You Get a Personal Loan to Pay Mortgage Arrears?
Yes, it may be possible to use a personal loan to pay mortgage arrears, provided you meet the lender’s approval criteria and can comfortably afford the repayments.
However, if you’re already behind on your mortgage, it’s important to address the underlying affordability issue rather than simply borrowing more money.
For many homeowners, a debt consolidation loan may provide a better long-term solution. By combining multiple existing debts into one more manageable repayment, some borrowers can reduce their monthly financial commitments and free up money to bring their mortgage repayments up to date.
Because lenders assess affordability as part of the loan approval process, reducing your monthly debt repayments may improve your affordability and increase your ability to qualify for additional lending, subject to lender criteria and responsible lending requirements.
How Debt Consolidation Can Help
Debt consolidation combines multiple existing debts into one new loan.
Rather than managing several loan repayments, credit cards and finance agreements each month, you make a single repayment.
Depending on the interest rate and repayment term, debt consolidation may:
- Reduce your monthly repayments
- Improve household cash flow
- Simplify your finances
- Help you avoid missed repayments
- Reduce financial stress
- Free up money to help keep your mortgage repayments up to date
While extending the repayment term can reduce monthly repayments, it may increase the total interest paid over the life of the loan.
Real Example: Saving Emma's Home with Smart Lending
Sometimes the difference between keeping and losing a home is finding the right lending solution before the situation becomes critical.
Emma fell behind on her mortgage after the unexpected passing of her father. Funeral expenses, unpaid rates and overdue household bills quickly placed her under significant financial pressure.
She initially applied for a small $4,000 loan to catch up on her mortgage arrears but was declined by mainstream lenders because of her existing defaults.
After reviewing her situation, Loansmart identified that Emma had substantial equity in her home.
Working with one of our lending partners, we arranged a secured loan that consolidated more than $40,000 of mortgage arrears, overdue bills and high-interest debt into one manageable loan.
The result:
- Mortgage arrears cleared
- Credit card debt consolidated
- Utility bills paid
- Weekly repayments reduced by $100
- Cash flow restored
- A pathway towards refinancing with her bank in the future
Watch Emma’s story below to see how debt consolidation and smart lending helped her regain control of her finances and avoid losing her home.
Read the full case study: Saving Emma’s Home with Smart Lending.
What to Look for in a Loan Provider
Loansmart is more than a loan broker. Our team includes licensed Financial Advisers who are committed to putting your long-term financial wellbeing first.
Rather than simply finding a lender willing to approve your application, we take the time to understand your income, existing debts, household expenses and financial goals. We explain the lending options available to you and recommend the solution that is likely to provide the greatest long-term benefit for your financial situation.
Once we’ve assessed your needs, we compare suitable lending options from our network of trusted New Zealand lenders. Instead of submitting multiple applications to different banks or finance companies, you complete one application and we do the hard work for you.
The Loansmart difference
- Licensed Financial Advisers who recommend lending solutions based on your individual circumstances and long-term financial wellbeing.
- Access to multiple trusted New Zealand lenders through a single application.
- Expertise in debt consolidation and loan restructuring to help improve affordability where appropriate.
- Fewer unnecessary credit enquiries, reducing the need to apply with multiple lenders yourself.
- Ongoing support throughout the application process and beyond.
Loansmart is also an Associate Member of the Financial Services Federation (FSF), demonstrating our commitment to responsible lending, ethical conduct and putting borrowers’ interests first.
Every recommendation we make is guided by responsible lending principles, with the goal of helping you make informed financial decisions that support your long-term financial wellbeing.
Whether you’re trying to catch up on mortgage repayments, reduce monthly debt commitments or consolidate existing loans, we’ll work with you to identify the most suitable solution for your circumstances.
Frequently Asked Questions
Mortgage arrears occur when you fall behind on one or more mortgage repayments. If the arrears continue to increase, your lender may begin working with you to find a solution before considering legal recovery action.
Yes, some borrowers may qualify for a personal loan to help pay mortgage arrears. Approval depends on your income, existing debts, affordability and the lender’s assessment criteria.
Yes. For some borrowers, debt consolidation can reduce monthly repayments by combining multiple high-interest debts into one more affordable loan. This may improve household cash flow and help borrowers stay on top of their mortgage repayments.
Missed mortgage repayments and loan defaults may be recorded on your credit history, which can affect future lending applications. Seeking help early may help minimise further financial damage.
A mortgagee sale occurs when a lender sells a property to recover unpaid mortgage debt after other options have been exhausted. It is generally considered a last resort after prolonged mortgage arrears.
The earlier the better. Seeking help before arrears continue to grow gives you more opportunities to restructure your debts, improve affordability and avoid more serious financial consequences.
If you’re worried about mortgage arrears or struggling to manage multiple debts, don’t wait until the situation becomes more difficult. Loansmart compares lending options from multiple New Zealand lenders and may be able to help you consolidate your debts, reduce your repayments and improve your financial position.
Talk to the Loansmart team today for a free, no-obligation assessment of your situation.
Sources
Stats NZ. Annual inflation at 3.1 percent in March 2026 quarter. https://www.stats.govt.nz/news/annual-inflation-at-3-1-percent-in-march-2026/
Stats NZ. Consumers Price Index: March 2026 quarter. https://www.stats.govt.nz/information-releases/consumers-price-index-march-2026-quarter/
Centrix. Credit Indicator Report (Latest Edition). https://www.centrix.co.nz/resources/credit-indicator-report/
Trade Me Property. Mortgagee Sale Properties in New Zealand. https://www.trademe.co.nz/a/property/residential/sale/search?search_string=mortgagee
