Loans for 30 years now norm

New Zealanders are taking longer-term loans to get a key in the door of a strong housing market, but at a cost of tens of thousands of dollars in extra interest payments.

Some lenders and mortgage brokers say 30-year loans have become the norm, particularly in centres such as Auckland or Queenstown, where high property prices mean home ownership is eluding those on modest incomes.

But the Retirement Commission and Consumers' Institute warn that unless borrowers step up repayments when or if circumstances allow, countless thousands of extra dollars will fly out the window.

"If you want to support your bank manager's retirement, take out the longest-term mortgage you can get," said institute chief executive David Russell.

"But if you want to be comfortable in your own retirement, pay it off as quickly as possible."

The Westpac bank's on-line loan repayment calculator puts repayments of a 30-year home loan of $200,000 at a one-year fixed interest rate of 8.25 per cent at $1502.53 a month.

This is $74 a month less than for a 25-year loan, and $438 less than repayments of $1940.28 over 15 years.

But the 30-year loan will end up costing $540,911 to repay if allowed to drag on for the full term, more than 2 1/2 times what was borrowed in the first place.

Comparative sums are $473,070 for a 25-year loan and a far less daunting $349,250 over 15 years.

Although large banks appear guarded over the lengths of mortgages, Auckland home-loan provider Cairns Lockie says most of its clients start on 30-year terms.

Director James Lockie said this allowed greater initial flexibility, although most accelerated repayments during the terms of their loans and very few lasted the full 30 years.

"The only time we would insist on a shorter term is where the borrowers' earning ability is constrained," he said.

New Zealand Mortgage Finance director Kim Lyons said 30-year loans had become the norm for his firm.