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What Mortgage Structure Is Best – Fixed, Floating or Splitting?

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What Mortgage Structure Is Best - Fixed, Floating or Splitting?

You can take your best guess at what might happen in the coming months and years, but you can never entirely predict the future.

Where does that leave you when you have a 30-year mortgage debt to pay off?

No one wants to pay more interest costs than necessary.

Safeguarding yourself against big hikes in your repayments largely comes down to your mortgage structure.

While the exact answer to the best structure for your mortgage will depend on your individual circumstances, we’ve assembled some general advice to help you understand what mortgage structure might work best for you.

Fixed vs Floating

We’ve discussed the ideas behind whether to fix or float your mortgage numerous times, so we’ll just do a quick recap here.

  • Fixed rates mean your interest rate and repayments will stay the same for a set period of time (anywhere between 6 months and 5 years). Fixed rates are great for predictability and budgeting, as you always know what you will pay. They also protect you if rates rise. The downside is that you might miss out on savings if rates drop significantly.
  • Floating rates move with the market, meaning they can fluctuate up and down depending on what’s happening locally and internationally. They are great for flexibility, but also come with an element of uncertainty. If rates drop, you will pay less, but if rates rise, your payments will increase.

Deciding whether you will fix or float your mortgage will often come down to how comfortable you are with risk, whether rates are expected to go up or down, and whether your personal finances can absorb increased repayments if rates rise.

A Split Mortgage Structure

Rather than choosing a blanket strategy of fixing or floating your entire mortgage, there is another tactic you could explore. You could explore the option of splitting your mortgage into portions and fixing each portion for a different term (or float some of it).

Here is an example of what that mortgage structure could look like:

  • One portion fixed for a longer term of several years (if the rates are good) to create certainty and stability.
  • Another part fixed for a shorter term of 6-12 months so that you can take advantage of possible rate drops.
  • Another small portion on floating or with an offset account if you have savings to utilise or have the possibility of making extra repayments.
  • You might mix up the terms of your portions, or have a mixture of fixed and floating so you don’t get hit all at once if rates rise, but also don’t miss out entirely if they fall.

The idea of splitting your mortgage into portions is that you spread your risk, rather than putting all your eggs in one fixed or floating basket.

The Risks and Benefits of Splitting

Like any strategy, there are risks and benefits involved with splitting your mortgage into different portions. They are:

Benefits

  • Protection against rate increases: If interest rates rise sharply, then you aren’t entirely exposed. Only part of your mortgage might be impacted.
  • Take advantage of rate decreases: By splitting your mortgage into different portions, some portions might benefit from falling rates.
  • More control over your cash flow: By not having to refix your entire mortgage at one time, you can smooth out repayment increases and avoid nasty shocks.
  • Better risk management: You can craft a more balanced strategy rather than committing entirely to one type of rate.

Risks

  • More complexity: Managing multiple portions can mean more admin work as you will need to keep track of different expiry dates, terms and loan products.
  • Break fees or refinancing costs: If you want to exit your terms early, you may end up paying multiple break fees or refinancing costs across the different portions. Switching lenders or changing parts of your borrowing can incur costs.
  • Potential for higher costs: You may end up paying more in the long run for some portions if the timing does not line up for a good market advantage.
  • More decisions to make: When you have more loan portions, you have more choices to make. You’ll need to make decisions when each portion comes up for renewal or refixing.

 

Is Splitting Your Mortgage Right For You?

Splitting your mortgage can be a great way to work the market and open yourself up to opportunity. But it is not necessarily right for everyone.

Here are some things to consider when assessing whether it is a good strategy for you:

  1. What is your tolerance for risk? Will you be comfortable if interest rates rise?
  2. What does your income look like? If repayment shocks will be hard on your budget, more fixed portions could help navigate this.
  3. How often are you willing to revisit or adjust your mortgage structure? Splitting requires active management
  4. Do you understand the finance market or have access to an expert mortgage adviser to help you choose the right option when your portions come up for renewal?

The Importance Of Working With A Mortgage Adviser

Generic advice like “rates are low, fix everything” or “rates are about to drop, go floating” doesn’t necessarily work for everyone. That’s why tailored advice can be so valuable.

A mortgage adviser does more than just tell you the options. They help you:

  • Analyse your financial goals, risk tolerance, and plans
  • Compare what the real costs will be under different scenarios and choose the right option that suits your budget
  • Forecast potential rate rises and help you decide how much risk is acceptable
  • Understand all the fees, break costs, or restrictions that might come with different loan structures
  • Build a structure that gives you both protection and flexibility, not just one or the other

There is no one perfect mortgage structure for everybody. The best setup will depend on your budget, cash flow, goals and appetite for risk, which is why the support of a mortgage adviser is essential.

If you would like to explore what mortgage structure might work best for your situation, then the friendly team here at Mortgage Suite can help. We’ll work through your numbers, risk tolerance and your plans to build a mortgage strategy that fits you. Contact our team today.

How To Pay Off Your Mortgage Faster

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how to pay off your mortgage

For many Kiwis, a mortgage is going to be their biggest financial commitment ever!

So, you want to make sure you are handling it wisely.

While interest rates have come down significantly in the last year, they are still higher than in the glory days post-COVID. So, you may be looking for ways to reduce your debt quickly and potentially save yourself thousands in the process.

The good news is, there are some practical steps you can take to pay your mortgage off faster.

As experienced mortgage advisors, we have some quick tips for you here and can guide you further with more information about your individual circumstances. Let’s get started!

 

Why Paying Your Mortgage Off Faster Is Worth It

Reducing the debt you have is always great for your finances, and every year you can shave off the term of your mortgage is money back in your pocket. Paying your mortgage off faster doesn’t just mean saving thousands of dollars in interest, it also means financial freedom.

Without a mortgage tying you down, you will have more disposable income for the things you want to do. You could be spending more time with family, travelling, investing, or simply enjoying life without the pressure of a big monthly repayment!

Paying your mortgage off sooner is about creating security for your family and building wealth for the future. So, let’s look at some of the ways you can do this.

 

10 Ways To Pay Your Mortgage Off Sooner

1: Make Extra Repayments

Most mortgage structures have the facility to make extra repayments without penalty. Even small additional payments can create big savings over time. For example, paying an extra $100 a month off a $500,000 mortgage fixed at 4.95% could trim 2.5 years off the term of your mortgage and save you almost $42,000 in interest! 

 

2: Choose Fortnightly Payments

By switching your repayments to a fortnightly frequency, you will actually end up making 13 monthly payments in a year, as opposed to 12. Without much extra effort, this will help you reduce your principal faster and save on interest.

 

3: Settlement Payment

When you purchase a new home, there will be a grace period until your first mortgage repayment is due. Instead of waiting for that date, make your first payment upon settlement. You will immediately reduce your principal and start saving interest right from the very start!

 

4: Maintain Repayments

Over the term of your mortgage, interest rates will move. If they happen to trend downwards, don’t reduce your repayments, just keep paying the original amount. Any extra you pay will go straight off your principal which will reduce the amount you owe and shave time off the end date of your loan.

 

5: Utilise Lump Sums

If you happen to receive a lump sum of money, you can put some or all of it toward your mortgage. Bonuses, tax refunds, or gifts are all prime opportunities to reduce your mortgage faster. Even a one-off payment can significantly lower the amount of interest you have to pay over time.

 

6: Round Up Payments

Often, minimum payments are messy figures of money with weird dollar and cents amounts. Rounding them up to the nearest hundred can be a small step that can gain you big momentum in the long term. You may also choose to focus on paying a segment of your mortgage off each year, such as setting a goal for $20,000 off the principal.

 

7: Pay The Fees Upfront

With some loans, there are establishment and admin fees. Instead of adding these fees to your loan principal, negotiate to pay them up front. This will prevent you from having to pay extra interest costs over the term of your loan.

 

8: Resist Lifestyle Creep

If you are lucky enough to receive a pay rise or grow your income, it is tempting to upgrade your lifestyle. If you can channel at least some of the extra cash into your mortgage, you will be better off in the long run. Even small increases in your regular repayments can make a huge impact.

 

9: Knock Out High-Interest Debt

Credit cards, vehicle finance or personal loans all tend to come with a high interest rate. Tackling these debts before your mortgage will reduce the pressure on your finances. When they are eliminated, you can then change your focus to paying off your mortgage.

 

10: Consider Your Loan Structure

Over time your situation will evolve. What suited you at the beginning of your mortgage may no longer be the best option for you. Take the time to review your mortgage structure with a trusted mortgage advisor to ensure it is still working for you.

There may be opportunities to change your structure to benefit you:

  • Fixing different portions of your loan can reduce your risk of interest rate blowouts
  • Switching banks may give you a better deal for your particular situation
  • Splitting your loan can give you greater flexibility; for example, you can funnel extra payments into a floating portion without penalty.
  • Linking your savings to your mortgage via an Offset loan means you only get charged interest on the difference. This can potentially cut your interest to zero on the offset portion.

 

Bonus Tip: A Mortgage Advisor Is Your Secret Weapon

Making smarter decisions about your mortgage is easier when you have professional support. A mortgage advisor can compare options across all lenders to get you the best deal. They can also guide you through refinancing to ensure you understand the fees, any penalties and the true long-term benefits.

More importantly, a mortgage advisor can help you avoid costly mistakes, negotiate better deals, and align your mortgage strategy with your overall financial goals.

At Mortgage Suite, we are all about creating the right repayment plan for you, so contact us now to start your journey to interest savings and financial freedom!

Why Is Everyone Switching Banks Right Now?

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You’ve probably seen the headlines. There are currently record numbers of borrowers switching their mortgages to new lenders.

In fact, in June, over 3500 borrowers switched a total of $2.475 billion in mortgage debt to new lenders. This is a record high since the Reserve Bank began tracking this data in 2017.

Switching has become so popular that it makes up 30% of all new mortgage lending.

But why the sudden surge?

Why is everyone so keen to switch banks at this moment, and is it something you should be considering for your own mortgage?

Let’s find out now!

 

Why Are People Switching Banks Right Now?

There are several factors that are currently making switching lenders more appealing right now:

  • Attractive cash-back offers: Many banks are offering cashback incentives to switch, as much as 8% to 1% of the loan’s value. This can create tens of thousands of dollars in your hand for larger mortgages.
  • Shorter fixed rates: A large portion of borrowers are currently on floating or shorter-term fixed rates, meaning they can switch without incurring significant break fees. Nearly 14% of borrowers are floating and another 39% are due to roll off their fixed terms by the enf og the year. This enables easy switching.
  • Frustration with current lenders: Some people are becoming increasingly unhappy with the service their current lender is providing and are making the change in the hope of seeing an improvement in service.

 

Is The Current Property Market Encouraging Switching?

The current state of the property market is certainly playing a role in people’s borrowing decisions. House prices are quite stagnant at the moment. Values are not really increasing, or if they are, the increase is quite negligible. This is keeping the property market in its stalled state – people are cautious about buying or selling.

As borrowers are not currently focused on market gains, they have the flexibility to explore where they can get rate savings or better offers. It is resulting in switching and refinancing purely for immediate financial benefits, rather than locking something in for future growth.

 

Should You Consider Switching Banks?

How do you know if switching banks could be a good idea for you? Asking yourself these questions is a good place to start:

  1. Are you currently on a short fixed term or floating rate? If you are, you can likely switch without incurring hefty break fees.
  2. Is your bank offering a poor interest rate or limited features? Banks are currently competing for your business! You may be able to secure better rates or a cash-back incentive with another provider.
  3. Are you unhappy with your bank’s service? Service not up to scratch? You might get better treatment with a different lender.
  4. Have you reviewed your mortgage recently? Rates and terms change. A mortgage advisor can help assess if you have the best deal for your current circumstances.

 

Why Mortgage Advisors Are Crucial When Switching

Switching your mortgage from one lender to another is a little more complicated than simply changing your internet banking login! You need to consider paperwork, valuations, loan terms and timing. That’s why it is crucial to have a financial expert like a mortgage advisor helping you through the process.

They can help you:

  • Compare all available options – including rates, mortgage structures and cash back offers. Looking at everything holistically will highlight the best complete offer for you.
  • Calculate true savings – there are some costs involved with switching banks, a mortgage advisor can help you understand if break fees, legal costs, and new valuation charges apply, along with the impact of long-term rate differences.
  • Handle the paperwork – there will be negotiations and transitions to navigate, as well as paperwork to prepare and sign. A mortgage advisor demystifies all of that, making the experience seamless and stress-free.
  • With ongoing support – your mortgage advisor will check in with you periodically to ensure you are still on the best deal after switching banks.

 

Thinking About Switching?

If you are considering whether switching banks is the right option for you, then we’d love to help you decide. Here at Mortgage Suite, we help you by:

  • Providing clear, personalised comparisons across all lenders, including cash-back, interest rates, and loan features.
  • Assisting with understanding the bigger picture, not just immediate cash rewards.
  • Using our skill and experience to manage the switch from start to finish, including recommendations on valuations, lending and legal coordination.
  • Prioritising excellent service. Our clients often comment on our responsiveness and attention to detail, exactly what they are missing from big banks!

Want to explore whether switching makes sense for you? Then get in touch now! Our team will guide you through the process and help you make the smartest choice for your mortgage.

Why Don’t Interest Rates Drop As Quickly As The OCR Does?

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Why Don’t Interest Rates Drop As Quickly As The OCR Does?

The OCR is up for review again on 9th July 2025.

While opinions are somewhat divided, the overall feeling is that the OCR will be reduced again to continue the work to stimulate the economy.

But why don’t interest rates drop as quickly as the OCR?

Let’s look into why that is.

Why Don’t Interest Rates Drop As Quickly As The OCR?

Back on 28th May, the OCR was reduced from 3.5% to 3.25%. That was a reduction of 0.25%, however, we didn’t see anywhere that level of reduction in interest rates across the board. That’s because, when the Reserve Bank cuts the OCR, interest rates don’t always follow exactly.

Here’s why:

1: Banks Have Other Costs

Banks don’t set their mortgage rates based on the OCR alone. They also borrow money from other sources both locally and internationally. These factors can all impact borrowing costs:

  • Global interest rates
  • Credit risk
  • Exchange rates
  • Market demand

If the cost of borrowing internationally stays high, banks might not be able to pass on the full OCR cut to their customers.

2: Deposit Rates Need To Remain Attractive

In order to lend money out, banks need people to put money into their system via savings accounts and term deposits. This is a careful balance of having the right money flowing in and out.

The balance can be upset easily if mortgage rates fall too far. It would mean the banks would also have to lower their deposit rates. This is less attractive for savers. If deposit rates fall too far, savers may take their money elsewhere and the banks would lose a source of funding.

So, to keep deposits flowing in, banks may not cut mortgage rates to the same level as the OCR.

3: Market Conditions and Risk Management

Banks will always need to balance customer interest rates with their own profit margins. They are running a business after all! When times are uncertain or when the housing market is soft (like it is currently), banks may choose to hold interest rates a bit higher to manage their risks.

4: Competition and Demand

If the market does not call for it, we won’t see huge drops in interest rates. When banks are vying for business from each other, they may be more aggressive with their rate cuts. However, then there is less competition in the market, there is a lower demand for loans, or they are worried about loan defaults as a result of economic uncertainty, then rates may only reduce slightly.

What does it mean?

As you can see, an OCR reduction will not automatically translate to an instant reduction in interest rates. However, it will usually trigger some downward movements in interest rates, even if it is only a modest reduction.

The Impact Of Reduced Interest Rates

Collectively, New Zealand’s mortgage payments are about to fall by about $3 billion! That’s because around 70% of mortgages will reprice in the next 12 months.

This is good news and economic recovery is thought to be on the way, but currently the recovery is not quite meeting expectations. What was once ‘survive til 25’ may have migrated to ‘it’ll be fixed in 26’!

The NZ housing market is still very subdued. In fact, house price growth has even been described as “glacial”. House price forecasts are only predicted to grow between 2% and 4% this year.

While this does impact your current asset, it can also create opportunities for investment with lower prices sticking around. With lower interest rates in play, it could be time for a chat with a trusted mortgage advisor to see what your options might be.

Will The OCR Drop Further?

While there have been modest reductions in interest rates in recent weeks, will these reductions continue to happen? Well, that all depends on how the economy fares and what the next OCR decision is on 9th July.

“At the moment, the OCR is at 3.25%, having been dropped from 5.5% since August last year. Financial market pricing is suggesting at the moment that the OCR might not go much lower than 3.0%, if indeed it does go lower than that at all.” [source]

However, ANZ economists maintain that the OCR could still drop as low as 2.5% in the coming months as they believe the economy needs more stimulation. In opposition to that is the threat of inflation rising beyond 3% (the absolute top of the band that the Reserve Bank want to maintain), and the fact that GDP figures came in higher than what most forecasters had predicted.

So, the jury is still out on what the decision might be on the 9th. It’s important to pay attention and seek advice from a financial expert before making any borrowing decisions this year.

What Should You Do?

If you’re not sure whether it’s the right time to fix or float your rate, or whether your current bank is offering you the best deal, the team at Mortgage Suite can help you compare options and make a smart, informed choice.

Reach out to us today to chat about your current interest rates and what could be done with your borrowing.

What Does The Reserve Bank Look At In An OCR Review?

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What Does The Reserve Bank Look At In An OCR Review?

In their most recent review, the Reserve Bank announced a reduction of the OCR to 3.25%.

So, how did they come to that decision?

And what goes into the rationale behind deciding what the cash rate should be?

Let’s take a look at what the Reserve Bank discusses at an OCR review.

What Does the Reserve Bank Review?

As you can imagine, there is a lot that goes into balancing the economy and ensuring the conditions are favourable for everyday Kiwis! So, these are the aspects that the Reserve Bank explore when making any decision about the OCR:1. 

1.Inflation

We hear a lot about inflation every time an OCR review rolls around. The Reserve Bank always aim to keep the inflation rate within 1-3%, targeting a midpoint of 2%. Keeping inflation within this band helps to keep NZ’s economic environment healthy and predictable. When inflation rises above this figure, things can become unstable, restricting the potential for growth and investment.

So, a big focus of an OCR review is current inflation trends and forecasts. This can help determine whether monetary policy needs to be tightened (raising the OCR) or loosened (cutting the OCR). Because inflation is currently under control, it helps to support the current trend of an OCR reduction at each review.

2. Unemployment

High unemployment levels can have a negative impact on NZ’s economy. When people are not working, they have less money to spend, potentially restricting overall economic growth. Also, when fewer people are earning, it puts pressure on government finances as less tax revenue is collected, and people may even require economic support from the government.

This can put a strain on government budgets and can even limit their investment in vital things like infrastructure, health and education. So, it stands to reason that the Reserve Bank keeps a close eye on unemployment levels to ensure they stay within a sustainable range.

3. Economic Growth

Is the economy growing at a healthy pace or showing signs of slowing down? This is another thing the Reserve Bank will review. They monitor key metrics like GDP growth rates, business confidence levels and consumer spending to see how the economy is performing.

Steady growth in these areas indicates a healthy economy, whereas low or negative growth shows the economy is slowing or shrinking. Monitoring these things will also help with forecasting inflation and unemployment trends. This allows them to decide whether the OCR should be raised or lowered to support healthy growth.

4. Global Conditions

Because New Zealand’s economy relies heavily on trade, international happenings can significantly impact our economy and the decisions the Reserve Bank makes. By keeping an eye on global events, financial market volatility, global inflation and commodity prices, it gives the Reserve Bank a good indication of what is happening around the world and whether it needs to do anything to combat emerging trends. 

5. Housing Market

The Reserve Bank will also pay close attention to house pricing, housing supply and credit growth. When house prices get excessively high compared to income or when rapid lending starts to take place, it can pose a risk to financial stability. Obviously, that isn’t a good thing when the economy is concerned.

Part of monitoring housing is assessing how easily households and businesses can access lending and what credit conditions are. If house prices are blowing out, lending is tightening too much or expanding too rapidly, then the Reserve Bank may adjust the OCR to maintain balance. 

Where Is The Economy Currently Sitting?

When the Reserve Bank undertakes an OCR review, it is interesting to look at their commentary along with the decisions made. The commentary can give an indication about what to potentially expect in the future. So, let’s take a quick look at what came out of the most recent review.

  • Inflation: Inflation remains within the 1-3% band that the Monetary Policy Committee have been targeting. While inflation expectations have increased, there is “spare productivity capacity” in the economy, so monetary policy does not need any tightening.
  • Economy: “Elevated export prices and recent reductions in the OCR are expected to support a modest pace of growth in the New Zealand economy, even as increased global tariffs are expected to slow global economic growth.” [source]
  • Global Climate: Global economic activity is not looking as great as was initially projected earlier in the year. This is largely due to downward growth projections from China and the USA as a result of their tariff war. Unfortunately, it’s also creating a lot of uncertainty in the global market, so there is an element of volatility for the RBNZ to be mindful of going forward.
  • Economic Recovery: Elevated export prices and lower interest rates are doing a good job of supporting positive economic activity. As the full effects of the OCR cuts have not yet been felt, the RBNZ are hopeful that our economy is modestly recovering.
  • Financial System Stability: The average interest rate across all mortgages has recently reduced and should continue to reduce, with half of the current mortgage stock due to refix to lower rates before the end of the year. Non-performing loans had increased in line with the recent contraction of the economy, but the banking system is still in a strong financial position to support its customers. None of this should impact monetary policy at this stage.
  • Alternative Domestic Scenarios: Currently, there are multiple scenarios for how global pressures could impact the NZ economy. It may cause greater inflationary pressure, or alternatively, lower global investment could result in lower inflationary pressure. These two scenarios would clearly impact the domestic economy in different ways. It highlights the importance of continued monitoring from the Reserve Bank in the coming months and developing monetary policy accordingly.

What Does It Mean For Your Mortgage?

As is our advice every month, the best thing to do is to speak with a trusted advisor about your current and future lending.

It is expected that interest rates will slightly decrease as a result of the recent OCR reduction, but are unlikely to reach the low rates of the post-Covid wave. Careful consideration of your financial goals and future plans is needed before locking anything in.

The team at Mortgage Suite would welcome the opportunity to discuss your next financial move. Whether you are refixing your current mortgage, exploring if there is a better mortgage structure for you, or considering new lending, we are here to provide honest and practical advice.

Chat with our team now.

Is The NZ Property Market Recovering?

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Is The NZ Property Market Recovering?

Bank lending is up and the OCR is coming down.

What does that mean for the property market? Will we finally see it start to recover? When is a good time to make your next property move?

Let’s look into the answer to all those questions now.

Bank Lending Is Up

Thanks to lower interest rates and the number of houses for sale, lenders are seeing a higher demand for mortgages during the beginning months of 2025. In fact, over the last 6 months, mortgage demand has increased for the first time since 2021.

So, what is causing this surge in lending?

Some of it is down to borrowers switching providers to secure better interest rates. But not all of it! Both owner-occupiers and investors are getting in on the action as market sentiment is improving gradually. The rebound for loans is expected to continue for the next 6 months as there is an expectation of further rate cuts and we start to see rising house sales.

While we have seen modest increases in lending, poor economic conditions and higher unemployment rates are still applying the brakes on a full recovery in mortgage credit demand. Many banks are saying that a broad recovery in the economy is required before we see more meaningful increases in lending, yet the outlook is currently muted thanks to domestic and global uncertainty.

KiwiSaver Is Down

US President Donald Trump’s tariff war is having an impact on KiwiSaver balances. After declaring a 10% baseline tax on all imports and enormous taxes on other individual countries like China, global share markets fell into a bit of a freefall. It created extraordinary volatility and uncertainty in bond, equity and currency markets.

As a result, many people saw their KiwiSaver balances slump. This is not great news for first home buyers who rely on those KiwiSaver balances to help with their deposit.

The solution? It’s time to get some advice! If you are concerned about the dip in your KiwiSaver balance, then chat with a trusted financial advisor or your KiwiSaver provider. It may be appropriate to switch your KiwiSaver balance to a more conservative fund, especially if you are trying to preserve the value for a house deposit, but your KiwiSaver Adviser will be able to advise you on what best fits your circumstances.

Even if your KiwiSaver balance has taken a bit of a dive, there are still good lending options for first home buyers. All banks have 10% or even 5% deposit options available. They could be a solution for your situation, so let’s chat about it.

OCR Is Also Down

KiwiSaver balances aren’t the only things that have dropped lately. The OCR has also. And it is expected to reduce even further. Previously, it was expected that the OCR would hit a low of 3%, but now major banks are predicting further cuts in August and October with a new expected low of 2.5%.

Thanks to persistent uncertainty on the global trade front and a “murkier” outlook for global growth, it is thought that our economy will need more support from monetary policy to ensure a recovery remains on track.

Whether the proposed reductions will significantly impact mortgage rates remains to be seen. It is thought that current longer term rates are already at a low point and could even rise in 2025. So, it really is time to pick a mortgage strategy now. Floating, six-month and 1-year rates are likely to go lower in the coming months, but as the Reserve Bank is nearing the end of its easing cycle, thinking about fixed terms now is essential.

What Is The Property Market Doing?

The OCR is down, as are mortgage rates, and unfortunately, house prices are down too. Recent figures from the Real Estate Institute of New Zealand show that the median house price has dropped 1.4% in the last year to settle on $790,000.

But, it’s not all bad news! National house sales counts are up 12.8% since March 2024, which does show a positive shift in the market. Lower interest rates and relatively low house prices are likely to thank for this shift.

Currently, we are in a buyer’s market with higher stock levels and longer selling times. It means buyers have more choice and negotiation power which results in softer price growth across the country. But, with recent and proposed OCR cuts on the cards, the market is looking to lift gradually in the coming months.

Better interest rates and improving buyer confidence will support more balanced conditions in the property market as the year progresses, hopefully resulting in a slow but steady recovery.

Is Now The Time?

With interest rates dropping and the property market recovering modestly, is now the time to make your next move? Well, it all depends on your current circumstances.

We welcome the opportunity to chat with you about your options when it comes to your current or future borrowing. Get in touch with our friendly team today and we’ll help you establish whether it is the right time to take your next step with property.

 

Is A Cash-Back Deal Worth Switching Your Mortgage To A New Lender?

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Is A Cash-Back Deal Worth Switching Your Mortgage? | Mortgage Suite

Should you switch your mortgage to another bank?

Currently, many banks are offering enticing cash-back offers to get people to transfer their mortgage lending.

But switching banks is about more than collecting a cash incentive.

You need to consider what’s actually involved in switching your mortgage to a new bank, and if it’s worth the effort

Here’s what you need to know before making a decision.

Are Cash Back Offers Worth It?

Currently, major lenders are offering cash-back offers to customers who are willing to move their mortgage to a new bank. When someone is offering you $10,000 to switch your mortgage, it’s a pretty tempting offer. We even managed to get someone a $50,000 cashback. But, it’s important to look beyond the immediate benefit of the cash and explore what’s really involved in a move.

What is a cash-back offer?

It’s an incentive a bank offers to encourage you to place your lending with them. The bank will give you a lump-sum of cash ranging in value, depending on the size of your mortgage. They don’t simply give this money for free though! There are some conditions involved:

  • Minimum Loan Amount – The amount of cash-back you receive is usually based on the size of your mortgage, with larger loans qualifying for higher cash incentives.
  • Lock-In Period – Most banks require you to stay with them for a set period (typically 2-4 years). If you leave early, you may have to repay the cash-back amount.
  • Competitive Loan Terms? – While the cash sounds great, it’s important to check that the new bank is offering a competitive interest rate and loan conditions.

Cash-back offers can provide an awesome short-term cash injection, but you need to ensure they make sense for your situation in the long run.

Are they worth it?

There isn’t a yes or no answer to this question, as you need to factor in:

  • Long-Term Costs – A cash-back offer will give you an instant financial boost, but is the new bank offering a competitive interest rate? Paying a higher interest rate over time could mean you actually spend more than the cash they are offering!
  • Break Fees – If your mortgage is on a fixed-term, you may find you have to pay a break fee to exit your current loan. This cost can sometimes cancel out the benefit of switching. Other fees, such as legal costs and valuation fees, may also apply. Sometimes, despite any immediate befits, it allows you to get out of higher fixed rate to current cheaper ones.
  • Loan Features – Thinking beyond interest rates and cash incentives, you need to consider whether the new lender provides better loan features. Some banks offer more flexible repayment options, offset accounts, or the ability to make extra repayments without penalty.

If the numbers stack up, a cash-back deal can be a smart move. But it’s essential to look at the bigger picture before making a switch.

What Is Involved in Switching Banks?

Moving your mortgage to a new bank isn’t as simple as just accepting a cash-back deal, and that’s the end of it. Here’s what the process typically involves:

  1. Mortgage Application – You’ll need to reapply for lending with the new bank, providing updated financial documents such as income statements, expenses, and debt details.
  2. Property Valuation – The new lender may require a fresh property valuation to confirm your home’s market value.
  3. Legal Process – Your solicitor or conveyancer will need to handle the transfer of your mortgage from one bank to another.
  4. New bank Accounts – Opening new bank accounts and transfer of AP’s and Direct Debits
  5. Settlement – Once all conditions are met, your loan is repaid with your old lender, and your mortgage is transferred to the new bank.

As you can see, switching your mortgage can take some time and energy. However, working with the right mortgage broker can make the process smooth and stress-free.

What You Need to Consider Before Switching

Before making the jump to a new lender, ask yourself:

  • Are you currently on a fixed-rate mortgage? – As we just mentioned, exiting your current mortgage early may attract break fees, which could reduce or eliminate any financial gain from switching.
  • How do the new bank’s rates compare? – A lower interest rate could save you more over time than a one-off incentive.
  • What fees are involved? – Some banks charge setup or legal fees, which may offset potential savings.
  • Will you need new valuations or documents? – Your new lender may require a new property valuation, which could come at an extra cost.
  • Does the new lender offer better long-term benefits? – Consider factors like flexible repayment options, offset accounts, or future borrowing potential.
  • What are your future plans? Your income, expenses and long-term financial plans should guide your decision. If you intend to sell your property soon, you need to consider how that might impact the conditions of your cash-back deal.

Why You Should Talk To A Mortgage Advisor First

Switching banks can be complicated, so you need to establish whether it is the right decision for you. A mortgage advisor can help you decide.

Here’s why working with an advisor is a smart move:

  • Compare All Your Options – Advisors have access to all the big banks and other lenders, so they can help you find the best deal beyond just the cash-back offer.
  • Understand the Fine Print – With a wealth of knowledge and experience, an advisor can assess the true cost of switching, including break fees and long-term savings.
  • Save Time & Hassle – From handling paperwork to negotiating with lenders, an advisor takes care of the hard work for you.
  • Get Ongoing Support – Even after you switch, an advisor can help you review your mortgage regularly to ensure you’re still getting the best deal.

Final Thoughts: Should You Switch?

Switching your mortgage lender can be a great financial move, but it’s not always the right choice for everyone. Before deciding, make sure you fully understand the costs, benefits, and potential long-term savings.

If you’re considering a move, the friendly team here at Mortgage Suite can help you assess whether switching is the best decision for you. Get in touch today for expert mortgage advice tailored to your situation!

How To Choose A Fixed Rate Term

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How To Choose A Fixed Rate Term

Sometimes, it can feel like a gamble to refix your mortgage.

Should you fix long, or is a short-term rate better, and what about floating?

The reality is that the best fixed term for you will depend on a mixture of the current market conditions and your personal financial situation.

Locking in for too long could mean you end up paying more interest if the rates drop. But fixing too short may leave you vulnerable to sudden rate increases.

Here’s what to consider when deciding on the right fixed-term rate for your mortgage.

 

Should You Fix Short Or Long Term?

As we’ve discussed many times, there are a number of things that can cause interest rates to fluctuate. Inflation, OCR movements, global influences, and economic status are all factors.

Paying attention to these factors can help you to decide the right rate term for you. Here is some general advice on understanding when each term is a good option.

When a Long-Term Fixed Rate Might Be Right

Fixing for a period of 3-5 years can be beneficial when:

  • Interest rates are expected to rise: If continuous rate increases are on the cards, fixing for a longer term locks in a lower rate before the hikes occur.
  • The Reserve Bank is tightening monetary policy: When inflation is high, the Reserve Bank often raises the OCR (which we saw during the COVID aftermath) which pushes mortgage rates up.
  • You prefer certainty and stability: When you lock in a longer term rate, you know exactly what your repayments will be for that fixed term. It’s great for budgeting and you won’t be surprised by an unexpected rate increase.

When a Short-Term Fixed Rate Might Be Right

Choosing a shorter fixed term of 6 months to 2 years can be beneficial when:

  • Rates are expected to decrease: If economic conditions suggest interest rates could fall, fixing for a shorter period lets you take advantage of lower rates sooner.
  • The Reserve Bank is loosening monetary policy: When inflation is tamed and economic growth slows, the OCR may be reduced to encourage borrowing and investment, this impacts interest rates and often brings them lower.
  • You want flexibility: Shorter term rates allow you to capitalise on changes in the market quicker. They are also great if you intend to sell your property to avoid break fees.

 

Personal Factors To Consider

While market trends and external factors play a role in choosing which rate is best, considering your own financial situation and goals is just as important.

Here is what you should be thinking about before locking in a rate:

  • Income Stability: If you have a stable, secure income, you may be comfortable taking a shorter fixed term to potentially benefit from lower rates in the future. But, if your income is less predictable, fixing for a longer term can offer peace of mind with consistent repayments.
  • Future Goals: If you are planning to upgrade, downsize, or move in the next few years then a long-term fixed rate might not be ideal. If you plan to sell your home soon, breaking a fixed loan early can come with costly penalties. However, if you plan to stay put for a while, a longer term rate might work in your favour.
  • Risk Tolerance: Does the thought of rising interest rates stress you out? Then, a longer fixed term may help you sleep better at night. Yet, if you are comfortable with a bit of risk and want to keep your options open, a shorter term may suit you better.
  • Repayment Flexibility: Extra repayments can shorten the term of your loan and reduce the overall interest you pay, but some fixed rate mortgages limit the amount of extra repayments you can make. Consider this when locking in. You may also want to split your loan – fixing part of it for stability while keeping some on a shorter fixed term or a floating rate for extra repayment flexibility.

 

What Should You Fix For Now?

General advice is great to have, but it’s also really helpful to have specific advice based on exactly what the market is doing here and now. That’s when it can be really helpful to have a mortgage advisor on your side. A skilled professional, like the team here at Mortgage Suite, can look at your situation and the current rates available to make a recommendation on the best solution for you.

Recently, the advice has been not to fix until ‘26. However, sentiment may be starting to shift. The thought is that inflation seems to have been tamed and the Reserve Bank can loosen monetary policy. But, borrowers need to be careful as rates are highly unlikely to drop to the 2-3% region that we saw around COVID-times.

“Nobody can predict the absolute bottom, but you have to keep in mind that a good rate in a normal world is 4% to 5%. People need to be careful not to anchor themselves with thinking that we might get to 2% or 3%, because that’s really not likely to happen.”

At the end of 2024, the advice was to float, or to choose really short terms, like six months to a year. Now, the advice is slightly different. “We’re encouraging people to think about spreading their risk, fixing a chunk of their mortgage for two or three years and keeping the rest on a shorter term. It gives you a bit more flexibility, as well as the benefit of those rates around 5%”

So, is 4.99% as good as you can get right now?

Many lenders are currently offering a two year rate of 4.99%, should you be jumping at it? Well, potentially. Adrian Orr of the Reserve Bank has labelled 4.99% as a great rate that provides certainty. “[It] means that as a borrower, you get the lower interest rate immediately rather than waiting for what happens to the OCR and competitive responses over the next six months.”

However, the Reserve Bank has indicated that they are likely to make to the OCR in the April and May reviews, so rates could still decrease further. With that in mind, the best thing to do is to consult a mortgage advisor before making any decisions.

The team here at Mortgage Suite would be more than happy to work with you to discuss the available options for fixed terms and rates to see which is the most suitable for your personal situation. Get in touch with us now to start the conversation.

How To Keep Your Finances Attractive To Lenders Over Summer

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Summer is traditionally a time of big spending.

With Christmas, family holidays and guests staying all rolled into one time period, the costs can start to add up!

However, if you are planning to apply for a mortgage or make a property move you will want to be mindful of what your summer spending might look like to potential lenders.

The good news is that you don’t have to live like Ebenezer Scrooge this holiday period just to keep your finances looking attractive.

We’ve put together a quick guide to make sure you can still enjoy your summer holidays without making any major financial blunders. Here it is:

Make Your Accounts Attractive To Lenders

A big part of being approved for lending is proving you are a responsible borrower. Lenders will scrutinize your habits so they can assess the risk factors of lending to you. You can prove your responsibility by ensuring your accounts look good by bank standards.

Here’s how you can do that:

1: Don’t Blow The Budget

Overspending is a big red flag for lenders, it can indicate you are not good with your money. A good way to keep your spending in line is to create a realistic budget and stick to it. When you create your budget, include your usual expenses, but also factor in your gifts, travelling costs and any festive activities.

The key step in making sure your budget is a success is sticking to it! You can use a simple spreadsheet or an app to track your spending and avoid unnecessary splurges. Proving you can stick to a budget goes a long way towards showing lenders you are in control of your finances.

2: Avoid Going Into Overdraft

Another part of displaying responsible spending is ensuring your bank accounts remain in the black! If you are frequently going into overdraft or dipping into your savings, then it’s not a good look. Plan ahead for your summer expenses so you can avoid going into unexpected overdraft.

3: Keep Up The Savings

Maintaining consistent savings is a really positive sign for lenders. Even small, regular deposits into your savings account make a big difference. Lenders like to see that you are building a financial safety net. If you can, automate your savings to align with payday so it becomes a habit even during the festive season.

4: Keep Your Income Steady

Does your income fluctuate seasonally? That’s pretty common if you are self employed or work in a seasonal industry. Unfortunately, fluctuating income can be a negative mark against your name for a lender. So, if you can find ways to smooth out your income month to month, it will gain you some brownie points. Side hustles or part-time work is a good way to bridge any income gaps and demonstrate stability.

5: Minimise Spending Splurges

When you apply for any form of lending, banks will review your accounts and spending activity. If you can limit excessive spending on unnecessary expenses like dining out or luxury purchases, it looks better for you. It allows you to present a more disciplined financial picture.

Big Mistakes To Avoid

It can be easy to get swept up in the excitement of Christmas. But, some financial blunders can make lenders think twice about approving your mortgage application. Here are the traps to avoid:

1: Running Up The Credit Card Debt

It can be tempting to swipe away and spend up large on your credit card over the festive season. Pre-Christmas and Boxing Day sales are particularly tempting. But, it’s important to remember that high credit card balances or late payments can damage your credit score. If you want to use a credit card for cashflow purposes or to gain reward points, then aim to pay off as much of the balance as you can each month – in full is best.

2: Buy Now Pay Later Schemes

While Buy Now, Pay Later schemes can seem convenient, they actually clutter your financial records and can even signal to lenders that you are living beyond your means. It is much better to pay for your purchases upfront or even put them on your credit card (then pay off the balance before it incurs interest).

3: Don’t Miss Bill Payments

With so much going on over the holiday season and the summer period, it is easy to get distracted and forget about paying your bills. To ensure that you don’t accidentally miss any due dates, it can be helpful to set up reminders or automatic payments. Also, make sure all your bill payments are covered before any discretionary spending takes place. This is a simple way to maintain strong financial records.

4: Overspending On Gifts

While it is nice to spoil your loved ones at Christmas, extravagant spending can eat into your savings and blow out your spending records. Instead of flashy gifts, consider some thoughtful, budget-friendly options instead. There are plenty of things you can gift that cost very little, think homemade options like cookies or even donating your time for gardenwork or other jobs.

5: New Borrowing

Taking out a new loan is not a good look when you are on a journey to buy a home. Whether it’s a personal loan for a summer holiday or financing a big-ticket item, avoid taking on new debt before applying for a mortgage. Lenders prefer to see a stable financial position free from recent borrowing.

Keep Those Finances Healthy

It is possible to have a fun summer break without breaking the bank and derailing your financial goals. It’s all about striking a balance between spending and sensibility. By budgeting wisely and avoiding costly financial missteps, you can set yourself up for success when applying for a mortgage.

This is not something that you have to tackle alone. If you are unsure about how to navigate summer in a way that the banks will approve of, then the best thing to do is to talk to a trusted mortgage adviser like the team here at Mortgage Suite.

Contact us today for expert tips and guidance on keeping your finances lender-ready, so you can enjoy the summer stress-free and still take the first steps toward owning your dream home.

Another OCR Cut – Now What For Your Mortgage?

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Another OCR Cut - Now What For Your Mortgage?

Another OCR announcement and another OCR cut. This is great news, of course.

But, just how great is it for your mortgage?

How much could you save and what is the best strategy from here?

Let’s answer all those questions now.

The Situation As It Stands

In their last OCR review of 2024, the Reserve Bank announced that they were cutting the OCR by a further 50 basis points, lowering it to 4.25%. They have also indicated that there will not be any further reviews until 19th February 2025. So, this most recent OCR cut was the last attempt to rejuvenate the economy for some time.

The previous OCR cuts do seem to be having an effect on the property market already. ‘In terms of mortgage numbers the total number of 19,273 loan commitments in October was the biggest in a single month since December 2021.’ Along with this proof of increased lending, the Reserve Bank is confident the housing market is recovering. It is forecasting house price growth of -0.2% for 2024, but feels the market will then increase, peaking at 7.4% growth in March 2026.

So, what does all that mean?

Basically, because the OCR and other factors are contributing to lower interest rates and there have been recent changes in lending conditions, the property market is picking up again. There is more confidence in the market with lower mortgage rates in play and probably further cuts to come.

This is good news for a lot of groups – first home buyers may be able to enter the market, people who were holding off on property moves might now be able to make them, and those with existing mortgages will see some relief in their interest rates.

How Far Will Interest Rates Drop?

Unfortunately, it is unlikely that we will see a 0.5% drop in all interest rates to match the 0.5% OCR reduction. As we have discussed before, the OCR is just one of the factors that impact mortgage rates here in NZ. There are a whole bunch of other factors to consider.

Currently, NZ’s economy is still sitting on the cusp of recession. We are either just in one or barely out of one. And global economies are not really fairing much better than ours. The USA is planning large tariffs on goods entering from Canada, Mexico and China, and the USA, UK and Australia are all facing stubborn inflationary pressures.

All of this is impacting the domestic cost of borrowing money for our major lenders. So, that is blocking the potential for large cuts on fixed mortgage rates currently.

All hope is not lost though. With a flurry of rate cuts on the eve of the latest OCR announcement and further cuts since, mortgage rates are still tracking down. There just isn’t the scope for huge cuts yet. It is likely that the longer term rates will remain high, with greater scope for movement in the shorter term rates.

How Much Could You Save?

Whenever interest rates start to go down, one of the biggest questions mortgage advisers get asked is, ‘Should I break my current mortgage rate so I can get a better one?’ The right answer to this question will vary depending on your personal circumstances.

When you agree to fix your mortgage at a certain rate for a set term, you are signing a contract with your lender. If you want to break that contract to try and save yourself money, you need to recognise that the lender may lose money. For that reason, they may charge what is known as a break fee to recoup any lost profit.

The amount of the break fee will depend on:

  1. The amount being repaid: The larger the amount, the higher the potential fee.
  2. The remaining term of your fixed-rate loan: The longer the remaining term, the higher the fee may be.
  3. The difference in interest rates: If current interest rates are lower than your fixed rate, the break fee will be higher.

For example, if you locked in a fixed mortgage rate of 5% but current rates are now 3%, the lender loses the extra 2% in interest for the remainder of your fixed term and would charge accordingly. That means, if you are considering breaking a fixed mortgage rate, you will need to weigh up whether the cost of a break fee will negate any potential savings you might get from fixing at a lower interest rate.

The best thing to do is to have a chat with a trusted mortgage advisor, like the team here at Mortgage Suite, before making any decisions. We can give you an indication of what to expect and whether breaking your current fixed term might be worth it.

What Should Your Mortgage Strategy Be?

There is always a lot to think about when it comes to your mortgage. Usually one of the biggest investments in your life, you want to make sure you have a strong strategy in place regardless of what your long term plans are.

For existing mortgage holders looking to refix: With interest rates predicted to fall further throughout 2025, the 6-month and 1-year rates are probably looking pretty attractive right now. The short term rates are popular because it means you can capitalise on any further reductions quickly.

For first home buyers: Now is an excellent time to enter the market as there are many listings available, interest rates are more reasonable than they have been in a long time, and lending conditions are more favourable.

For property sales and subsequent purchases: The same sentiment applies as for first home buyers, now could be a good time to make that move you had been considering.

For investors: DTI rules that came into effect in July could impact investment portfolio opportunities, but this could still be a time to explore your options.

The best advice we can give is to discuss your plans with a trusted mortgage adviser. Here at Mortgage Suite, we would welcome the opportunity to have this chat with you. Once we understand more about your situation, we can provide tailored advice to help you make the best decisions regarding your mortgage and also help you achieve your goals. Contact us now.

 

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