Just 8 per cent of households owe 40 per cent of the entire mortgage debt of New Zealand banks.

High household debt continues to concern the Reserve Bank, which has released its Financial Stability Report for May.

It left its loan to value lending restrictions (LVR) in place limiting the proportion of new home loans with less than 20 per cent deposits.

But it also reported that much of the country's record high household debt was concentrated in the 8 per cent of households which own investment properties.

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Recent first home buyers were also deeply indebted compared to households headed by people who bought their homes when house prices were much lower.

"Household indebtedness has increased dramatically in the past 30 years," the Reserve Bank said. "In 1988, the average household owed around $16,000 in debt and had an income of around $35,000 – a debt-to-income ratio of 46 per cent."

JOHN HAWKINS/STUFF Some dairy farmers would take years to manage their debts down, the Reserve Bank says.

By the end of 2017, this had risen to 168 per cent with a 10-fold increase in average household debt to nearly $160,000, while average incomes had only slightly less than tripled to $95,000.

Some households had debts of more than five times their incomes.

"The distribution of household debt has also become more concentrated, as households with mortgages have become more indebted over time," the Reserve Bank said.

Banks had tightened mortgage lending standards, and had signalled to the Reserve Bank they would remain tight for the rest of the year.

That had led to house prices stabilising.

The Government plans to prevent property investors from using losses on their rentals to reduce their personal tax had also played a role in stabilising house prices, but low mortgage rates and high net migration continued to support house prices.

ROBERT KITCHIN/STUFF Reserve Bank governor Adrian Orr.

But, the Reserve Bank said: "The share of new lending with high risk characteristics is still concerning".

"The proportion of new mortgage lending to borrowers with debt-to-income ratios above five is high compared to international peers, such as the UK."

High debt levels left households vulnerable, and left the economy vulnerable to a default-induced spiral down, the bank said.

The LVRs had to remain in place until risk in the financial system had "normalised", it said.

Just 15 per cent of each bank's new home loans could have deposits of less than 20 per cent, and only 5 per cent of loans to property investors could have deposits of less than 35 per cent.

The Reserve Bank also warned of continued high debts among some dairy farmers. Some farmers would need a significant period of time to manage their debts down.

While the banking system remained sound, the Reserve Bank demanded banks provide information proving they had not been involved in systematic abuse of customers. The demand followed revelations from Australia's banking commission.

The Reserve Bank gave banks until May 18 to respond, and it was now evaluating banks' responses.

There were continued concerns over some insurers, and the Reserve Bank believed a lack of competition, combined with high commissions paid by life insurers, were leading to high premiums for households.

"Market share remains concentrated. Life insurance commissions are particularly high, which inevitably flows through into higher premiums."