Almost a third of people won't have paid off their mortgages by the standard retirement age of 65, according to a bank report.
A generation of "grey" borrowers are facing either working longer, using their KiwiSaver fund to pay off the debt, or hope equity in their homes will solve the problem by downsizing.
Research from the BNZ last year shows even current, historically low interest rates have not been enough to coax many people to get ahead in paying off their home loans.
Mortgage rates are at their lowest point since the 1960s, but research by Colmar Brunton for BNZ, found more than 60 per cent of home owners were not using this opportunity to pay off their home loans faster.
Craig Herbison, BNZ's Director of Retail and Marketing, said many people were taking a 'she'll be right' approach to what is most often the biggest financial commitment of their lives.
"If the current rate environment isn't motivation enough, I don't know what is," Herbison said.
"Our research found 74 per cent of people claim they're concentrating on reducing and minimising their overall level of debt, but they're ignoring the biggest and most important one."
Just over half the people polled wanted to retire early, with most believing the mid fifties is the ideal time to be mortgage-free, researchers found. Yet the average actual age for people to people to clear their mortgages was 60. Only 37 per cent of people with mortgages had done the smart thing and kept their mortgage repayments the same after rates fell so they could pay off their loans faster.
Researchers delved into the rationale behind people's mortgage repayment decisions, and found that only 13 per cent were paying the minimum because they could afford no more.
"This means 87 per cent of New Zealanders have the opportunity to do more," Herbison said.
Even small increases in payments make a huge difference the Sorted mortgage calculator shows. A $300,000 mortgage with an average interest rate of 6 per cent repaid over 30 years will result in just over $347,000 of interest. Increase the fortnightly repayments by just $30 and the mortgage would be gone in 28 years and $36,200 less in interest will have been paid.
But with mortgages having got so much bigger, people are going to have to get smarter, Herbison believes.
"As 30-year mortgages terms become more and more prevalent, New Zealanders need to be smarter with how they manage their mortgage," he said.
The research also showed 53 per cent of New Zealanders are relying on the value of their homes to set them up in the future. One in five will not have saved enough to stay in their own place, and planned to downsize or move to a different town or city to access the equity in their house to fund their retirement.