The number of households behind on their mortgage repayments is up 26 percent on the same time last year, with 19,300 accounts past due.
New data from credit bureau Centrix showed mortgage arrears climbed for the eighth consecutive month in March.
Overall consumer arrears rose to 11.8 percent of the credit-active population, or about 427,000 people.
Managing director Keith McLaughlin said mortgage repayments were typically the top priority for borrowers and the high level of arrears showed the effect of high interest rates and biting inflation.
"It really is an indication that some households are really starting to feel the pinch of the increase in interest rates, coupled with the increase in cost of living," he said.
McLaughlin said the continued trend of mortgages going into arrears was concerning.
"Kiwis are pretty clever about prioritising who they pay," he said.
"You tend to pay your car loan or your mortgage first, and then if things are a bit tight, you might put your buy-now-pay-later or your personal loan back a month or so and then pick that up at a later time."
New mortgage lending was also down as sales volumes continued to slump, with lending down nearly 48 percent year-on-year.
Car loan arrears were also up 3.6 percent year-on-year, McLaughlin said.
"Nobody wants to lose their car because that often affects your employment as well, and you use your car to get to work."
He expected the number of people in arrears would increase in the coming months.
"I can't see a circuit breaker," McLaughlin said.
"Maybe come September, October, when Summer is approaching and there's more stability and interest rates and also in the cost of living, there's more clarity - more consumer confidence, we might start to see things improving.
"But at the moment, I can't see anything on the horizon that's going to dramatically change that."
RNZ
