The average farm mortgage has increased to almost $4.8 million, with average interest rates of 8.3 percent, a Federated Farmers banking survey last month showed.
And farmers aren't happy with their banks; the satisfaction rate is sitting at 51 percent, the lowest since the survey started in 2015. It was 80 percent in 2018.
More than 50 percent of calls to the Rural Support Trust were for help around financial and banking issues, Northland Federated Farmers president Colin Hannah told Checkpoint.
"Our returns are down, our costs are up, and there's very little spare cash in our pockets. In fact, for some none at all."
He said young farmers were often declined bank loans and it was causing them a lot of "mental stress".
"We just want a more balanced view of what's actually driving the increase in interest rates that some of these young farmers are experiencing."
He had heard of 12 percent interest rates, and in one instance 18 percent on overdraft rates - although they were usually between 10 and 18 percent.
"A lot of these farmers are asset-rich, but they're cash-poor."
Of the 3000 farmers north of the Auckland Harbour Bridge, he said it was mostly younger farmers facing financial hurdles.
"Our young future farmers who we really want in the industry, and they get knocked back like that. You can only take so many knockbacks.
"Most farmers, if the going gets really tough, and I've dealt with a few in the past, will come out probably with all the debts settled but they won't have much to live on themselves."
After the drought, especially this year, Hannah said many farmers were ringing to say the grass was not growing despite trying multiple measures.
"So they are starting to use up all their reserves that we've still got three months of winter yet."
Hannah said banks were facing a moral issue: "If you're taking out excess profits, it needs to be questioned."
The Primary Production Select Committee has launched an investigation into rural banking.
Federated Farmers had been calling on the government to carry out an independent inquiry into rural banking since September 2023, claiming farmers are paying much higher interest rates then their urban counterparts.
Rural lender Rabobank, in April, said rural interest rates were high due local regulatory settings.
"Banks are required to hold a significantly greater proportion of capital against rural lending than for residential lending, and any comparison of rural and residential interest rates should take this difference into consideration.
"That being said, we are supportive of any process that improves the transparency of agribusiness lending and the key variables which influence lending interest rates in the sector."
RNZ
