If you're wanting to buy a home, you might need to lower your expectations about what you can afford after the Government gave the Reserve Bank the power to cap mortgages against your income.

That means the amount you're allowed to borrow could be cut.

The aim of this is to stop homebuyers drowning in debt. Soaring house prices mean buyers are borrowing more than ever, with $24.5 billion worth of mortgages dished out in the first quarter of the year. 

Monster mortgages have gone mainstream, with broker Bruce Patten saying the buyer struggle to keep up with rising house prices is real.

"Normally, they're somewhere around six to seven times their gross annual income, as a norm," says mortgage broker Bruce Patten.

"We've got young couples, not in relationships, getting together to buy."

Now the Government is making moves to prevent buyers from getting up to their eyeballs in debt, allowing the Reserve Bank to limit how much someone can borrow based on how much they earn. 

It's yet another tool to try and cool house price growth. 

"Obviously that obscene growth in house prices recently reiterates that need to do even more," says Brad Olsen, Infometrics senior economist.

But there are concerns this will make buying impossible for low-income earners. 

"You're just going to cut so many first-home buyers out of the market," Patten says.

Finance Minister Grant Robertson is promising it won't. In a statement he said "any limit should apply only to investors".

And he doesn't want it immediately, adding: "The Government has already put in place a number of measures to cool the housing market, and it's important to give these initiatives time to assess their impact."

READ MORE

• Housing market continues to climb but investors backing away
• Most Kiwis still don't think house prices will stop rising
• New Zealand housing market breaks resale profit record as Wellington, Auckland post huge capital gains
• Average NZ house price now above $900,000, no sign of slowing down

A report given to him last month suggests capping debt at around six or seven times a borrower's income - because that "would have little impact on first-home buyers" and significantly squeezes investors.

"The writing is on the wall," says Olsen.

The median annual income nationwide is almost $34,000. A debt-to-income cap of six would mean the maximum mortgage that earner could get is about $200,000 - not much when the median national house price is now $820,000.

"The rich will get richer and the poor will get poorer," says Patten.

Other countries have much lower limits - Ireland's is 3.5, and the UK's is 4.5. But we already have super-tight lending restrictions, meaning most buyers need a 20 percent deposit, and investors 40 percent. 

"There's this real feeling still that our financial system may be at more risk because we have very high levels of debt coming forward," says Olsen.

It's important to note that limits aren't coming in yet. The Reserve Bank will talk to banks about it over the coming months, and if it goes ahead it'll consult with the public first. 

But it does now have a Government-approved 'go' button to push whenever it likes. 

The Reserve Bank is quickly becoming Grant Robertson's biggest muscle; he's thrown almost all responsibility to rein in the housing market across to them. 

The central bank has wanted to do this for years; its plan to add debt-to-income caps to its toolbox wasn't accepted by the National Government.

But with recent price growth, this Government will give it whatever it wishes. Although not without ensuring a large chunk of its voters - first-home buyers - are protected first.