The Federation of Family Budgeting Services says banks need to do a better job of warning people about the long-term dangers of getting mortgages.
The organisation says some people are finding the current low interest rates very tempting and are not being encouraged to budget for financial problems in the long term, such as losing a job.
Fixed home loan rates have dropped to record lows, following floating mortgage rates down.
The latest figures from the Reserve Bank show mortgage approvals have risen by about 30% in the past year to more than $1.2 billion a week.
Federation chief executive Raewyn Fox says the low rates are attractive, but people need to be honest with themselves about their future commitments.
She believes banks could be more responsible and encourage borrowers to think about what would happen if they could no longer work.
However, the New Zealand Bankers Association says banks are being responsible lenders.
Chief executive Kirk Hope says all banks look at the individual circumstances of the people who are borrowing and does not think they are just focusing on the short term,.
"The average life of a home loan in New Zealand is roughly seven years. So what you have is a loan lifecycle where people might sell their property after a seven-year period. In terms of the locking-in perception and not looking at the long-term, I don't really accept that."