The rise of the million-dollar mortgage
More buyers are starting their homeowning journeys with mortgage balances of $1 million or more. While that may sound eye-watering, industry insiders say it’s no longer unusual in today’s high-priced housing markets—especially in and around Auckland.
How common is a million-dollar mortgage?
Mortgage advisers report that seven-figure loans are a regular feature of the current market. One adviser noted that their team frequently settles loans above $1 million, with the typical loan size now hovering around $800,000 to $850,000 across a wide range of buyer types, from first-home purchasers to movers and investors.
Bank data backs this up. One major lender indicated that roughly one in six new home loans this year has been for $1 million or more, highlighting how price levels and borrowing needs have shifted.
Why Auckland stands out
Recent figures show first-home buyers in Auckland paying a median price near $900,000, putting many on the cusp of seven-figure borrowing once deposits, fees, and renovation plans are factored in. Economists point out that the greatest concentration of million-dollar mortgages is naturally found in Auckland: it’s the largest market and has some of the highest property values.
Other premium areas also see their share of big loans. But in terms of sheer numbers, Auckland dominates because it combines scale with high valuations. Incomes tend to be higher in big cities too, particularly in Auckland and Wellington, which can make the debt-to-income equation more manageable for dual-income households with strong salaries. Outside these centres, similar borrowing levels may be tougher to sustain.
Serviceability matters more than value swings
With house prices having softened at times, some households may find themselves in negative equity—owing more than their home is currently worth. While that can be unsettling, the core issue for lenders and borrowers alike is serviceability: can you meet repayments over the long term?
If the mortgage can be serviced comfortably, banks typically aren’t concerned about short-term fluctuations in property value. The bigger risk is a hit to income—like job losses or reduced hours—that undermines repayment capacity. In an environment of economic uncertainty, preserving stable earnings and maintaining a buffer for higher expenses or rate changes is crucial.
What a $1 million mortgage can cost
Large loans come with commensurately large repayments. Using a test rate of 7% over a 30-year term, annual repayments on a $1 million mortgage are around $80,000. After factoring in tax and day-to-day living costs, that level of commitment typically implies a household income in the vicinity of $200,000 to remain within prudent affordability settings.
Of course, the actual rate paid may differ from a bank’s test rate, and repayment structures can vary. Still, the example underscores the importance of running careful calculations—and considering buffers for rate rises—before committing.
Keeping seven-figure borrowing sustainable
- Stress-test your budget: Model repayments at higher rates and shorter terms to see how resilient your cashflow is.
- Build a safety buffer: Aim for savings that can cover several months of repayments and essential expenses.
- Watch your debt-to-income ratio: Higher incomes can support larger loans, but be mindful of how quickly repayments scale with rate changes.
- Plan for job and income stability: Consider how secure your sector and role are, and whether you have insurance or other backstops.
- Review regularly: Revisit your mortgage structure and budget as rates, incomes, and life circumstances evolve.
Million-dollar mortgages are no longer outliers—they’re becoming part of the landscape in high-value markets. For borrowers, the difference between discomfort and confidence often comes down to the fundamentals: steady income, realistic budgets, and a margin of safety that can withstand the unexpected.
