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Why Are Interest Rates Going Up If The OCR Is Going Down?

Posted on by Lindsey Carroll
Why Are Interest Rates Going Up If The OCR Is Going Down?

You wouldn’t be alone if you got a bit of a shock last week when Westpac announced it was putting some of its interest rates up.

After all, didn’t the OCR just go down?

Aren’t those interest rates heading in the wrong direction?

Let’s explore exactly what’s happening in the market and answer the question of why are interest rates going up in the lead-up to Christmas!

The OCR Just Went Down

In its last review of the year, the Reserve Bank announced that it was reducing the OCR by 25 basis points to 2.25%. This was a widely expected cut in the Reserve Bank’s quest to balance the economy.

However, in this November review, one (out of six) of the Monetary Policy Committee members voted to leave the cash rate unchanged. We can likely take this as a sign that we’ve reached the bottom of the current interest rate cycle – the OCR is unlikely to drop much lower.

After the cut was announced, we all paused and eagerly awaited news from the banks that their interest rates would be reduced again. We weren’t disappointed when all of the banks announced a reduction in their floating rates.

The talk in the market centred on providing relief to borrowers in the lead-up to the holiday season. But it was also noted there would be positive indicators that the economy was recovering by the next review on 18th February, so further cuts are unlikely.

So, how did we go from interest rate reductions at the end of November to an increase in rates just a couple of weeks later?

Why Are Interest Rates Going Up?

Westpac kicked things off by increasing its two to five-year terms by 30 basis points on Tuesday 9th December. Their two-year fix rose to 4.75%, and their five-year special rate moved to 5.29%. At the same time, they lowered their six-month rate to 4.69%.

ASB was not far behind, also increasing their long term rates. Soon, the other banks followed. But why?

There are a couple of reasons. Wholesale rates have crept up, so it is currently costing the banks more to borrow money. It was thought that wholesale rates rose in reaction to the Reserve Bank’s commentary.

“Before the latest OCR decision, wholesale markets had virtually priced in one more cut. So when the Reserve Bank indicated it thought another cut might not be needed, wholesale rates ticked up.” [source]

Is it an overreaction? Some economists think so. It has been a very quick reversal in position, going from interest rate cuts to increases in just two weeks. It can also feel confusing that interest rates are going up when the OCR just went down. But as we have mentioned in previous articles, there are many factors that determine what interest rates are set at, the OCR is just one component.

Where Are Rates Going Next?

It is hard to say definitively what will happen to interest rates in the short and long term. It has been reported that banks have some room to absorb wholesale rate increases. The main banks are currently operating at a net interest margin of 2.4% – 2.5%, roughly the same as what they were a year ago.

The fact that the main banks have all made moves to increase their longer-term rates is quite telling. But we will have to keep an eye on what might happen over the holiday period. If people are worried about rates rising again, they may restrict their spending over Christmas. That could force the Reserve Bank to make another cut in its February review. 

The key thing to note from all of this is that wholesale rates have stopped falling. Where things go from here is still not set in stone.

What Does It All Mean?

So, what does all of this mean for your average mortgage holder?

Well, the best advice we can give is to seek advice that is tailored to your personal situation. A mortgage advisor will be your best resource to navigate this period of the property market. They can help you build the best mortgage structure based on your current borrowing and future plans.

Economists have been saying for some time that we are nearing the bottom of this interest rate cycle. So, it could be worth considering longer-term mortgage fixes as the long term rates are unlikely to go any lower. In fact, the last week has shown they are likely to go higher.

In saying that, a blanket fix across your entire mortgage is not always the best option. Times are still uncertain and we don’t know what might happen next. It could be a better option to split your mortgage over a couple of different terms so you aren’t exposed to as much risk.

There is also the fact that banks are offering decent cash-back incentives to refinance. So that is another factor to consider if you are a new borrower or it is time to refix your current mortgage.

Basically, we think the best solution is to give us a call so that we can talk through your options. We can help you create a mortgage structure that will work with your budget and circumstances. Reach out to our team today for helpful, friendly and obligation-free advice.

10 Smart Ways To Pay Less Interest On Your Mortgage

Posted on by Lindsey Carroll
10 Smart Ways To Pay Less Interest On Your Mortgage

No one wants to pay more interest than they have to.

However, most people think in order to pay less interest on your mortgage, you must make big extra repayments or radically change your lifestyle.

The truth is, you can save thousands of dollars in interest costs by simply being strategic with the way your loan is set up and how you manage it over time.

Here are 10 smart ways you can reduce the amount of interest you pay on your mortgage…

 

10 Smart Ways To Pay Less Interest On Your Mortgage

1: Choose The Right Loan Structure

The structure of your loan will determine how much flexibility you will have to reduce the interest you pay in both the short and long term. Mixing up your fixed terms or even having a split between fixed and floating portions can create opportunities to pay more off the principal without penalty.

The right structure can easily save you tens of thousands over the lifetime of your mortgage.

2: Align Your Loan Terms With Your Future Plans

Many homeowners are guilty of locking in their mortgage terms without really thinking ahead. They look at the rates and lock in based on that. But, if you are planning on renovations, refinancing, or selling within the next few years, setting up shorter fixed terms can save you money on break fees and even give you access to better rates sooner.

Likewise, if you intend to stay put in your property for a while, longer term rates can be attractive for stability, and you can always increase your repayments slightly to bring the interest portion down.

3: Don’t Mortgage Your Fees

It can be very tempting to roll any legal fees, application costs and loan setup charges into your mortgage. But, if you do that, you will be paying interest on those small costs for decades to come, making them much larger costs.

By paying these fees upfront, you can significantly reduce your long-term interest bill.

4: Maximise Your Banking Setup

Offset accounts, revolving credit facilities, and even a well-chosen transaction account can dramatically reduce the interest you pay. The simple act of keeping your income sitting against your mortgage, even if it’s just for a few days before the bills come out, can seriously cut down on interest costs.

5: Kick The High-Interest Debt First

High-interest debt, like credit cards, personal loans or buy-now-pay-later schemes, is guilty of quietly stealing the money you could be putting towards your mortgage. If you are only paying the minimum payment on these debts, you will be incurring lots of interest, often charged upwards of 20%!

Clearing those debts faster frees up your cash so that you can put it against your home loan instead. This will save you interest in both areas!

6: Line Your Repayments Up With Your Income

You don’t need to take whatever date the bank gives you for your repayments. Instead, chat with them about aligning your repayment dates with your income cycle.

That way, if you are using things like an offset account, you can maximise the efficiency of this. With the right set-up, when your salary lands in your account, it will immediately offset your home loan, reducing your loan’s average daily balance and the interest charged.

7: Review Your Mortgage Annually

Many homeowners set up and forget their mortgages, only revisiting them when a fixed term portion is about to expire. A lot can happen in that time – interest rates can move quickly, bank policies can change, and your financial situation could evolve.

A quick annual review with your mortgage adviser can identify whether your mortgage is still competitive, if another bank is offering better incentives, or whether restructuring could save you interest.

8: Consider All The Terms When You Refix

How long you should refix for will always depend on the current market and whether interest rates are tracking up or down. When the market is tracking down, shorter-term fixes can be beneficial to capitalise on savings quicker, but when rates are rising, a longer-term fix could give you consistency in your payments.

You can also consider shortening the overall term of your loan to pay off in 25 years instead of 30. It does not always mean drastically increasing your repayments; your mortgage adviser can help you run the numbers and investigate.

9: Maximise Extra Income

Bonuses, tax refunds, and unexpected cash boosts are brilliant for reducing interest. But the timing and how you apply them to your mortgage matter. Sometimes, putting a lump sum off the principal is the most beneficial.

Or, putting a lump sum against an offset portion can be the best way. It lets you keep access to the funds while still reducing interest. Used well, it’s a flexible and powerful tool. Again, this is something your mortgage adviser can help you decide on.

10: Don’t Be Afraid To Negotiate

There is almost always wiggle room in the rates that a bank will offer you. Banks generally have unpublished rates and discretionary pricing, but many homeowners either don’t know this or simply don’t ask!

A good mortgage adviser will know when these opportunities exist. They can also give advice on when it might be timely to consider switching banks if you can gain a cash-back offer, sharper pricing or genuine savings. With the right analysis, switching banks can be one of the easiest ways to reduce your total interest bill.

Why Tailored Advice Matters More Than Ever

This list highlights just how many different ways there are for reducing mortgage interest, but also why no single strategy works for everyone. Your goals, income, timeframe, and risk tolerance all shape what is “smart” for your situation.

As an experienced adviser, Mortgage Suite looks at more than just your interest rates to find the combination of structure, repayment strategy, and banking setup that genuinely saves you interest.

If you’d like a personalised plan for how to pay less interest without compromising your lifestyle, I’m here to help. Let’s chat about how we can make this happen!

What Should I Do When Interest Rates Decrease?

Posted on by mortgage_admin
What Should I Do When Interest Rates Decrease?

It is always an exciting moment for homeowners when mortgage rates start to track downwards.

Climbing interest rates can be a killer for the family budget, eating into your earnings and reducing what’s available for all the other things you need to pay for.

But what is the best thing to do when the interest rates decrease?

Keep more money in your pocket? Pay more off the principal? Or invest in your future?

The answer will depend on your current situation, so let’s explore the options available to you.

 

The Burden Of A Mortgage

Since the interest rate heydays of Covid, many families have slowly been feeling the pressure of paying their mortgage. What would have felt manageable in 2020 started to become a real millstone. Every time the OCR crept up another few basis points, those once-affordable properties felt more and more like a burden on the family finances.

Typical of the Kiwi attitude, we simply soldiered on and resolved to ride it out. Finally, in 2025, interest rates are starting to ease to a level where mortgage payments feel more manageable again.

As many as 32% of fixed-term mortgage holders will have the opportunity to refix in the next six months. Another 12% of mortgages are currently on floating rates, so almost half of ALL mortgage holders will be able to fix at a new lower rate very soon.

So, how can you use this time to secure your family’s financial future?

 

The Rates Have Dropped, Now What?

Tens of thousands of homeowners are all facing the same decision as interest rates trend downwards. What should you do with the extra funds? It wasn’t so long ago that we were dealing with rates starting with a 6 or a 7. But now things are in a much more attractive 4-5% range.

If your fixed term is about to expire, these new rates could save you hundreds of dollars every month. So, what is the best thing to do with that extra cash?

You have a number of options:

 

1: Pocket the $$$

If things have been feeling incredibly tight each month and you are struggling to cover everything, you might consider adding some of that extra cash back into your household budget. It can reduce financial stress and make life just that little bit easier.

Around this time two years ago, in 2023, the average one-year rate was 7.1% and currently, most banks are offering around 4.49% for the same term. In dollar terms, that is quite significant! On a $500,000 mortgage, weekly repayments at 7.1% would be $775 per week. However, they drop to $584 per week at 4.49%.

That’s savings of almost $200 a week or over $10,000 a year! So, you could see some significant relief in your weekly budget, allowing you to get your head above water and breathe again.

 

2: Keep Your Repayments At The Same Amount

The math is simple: if you can pay more off the principal of your mortgage, it will reduce the term and the amount of interest you have to pay. So, if your current budget allows you to keep your mortgage repayments the same when refixing to a lower interest rate, it will help you save money in the long run.

Even paying small additional amounts can make a big difference to your overall loan term. You can shave months (or years) off your mortgage by paying a little bit more than the minimum amount every month.

Not only does this reduce the term of your mortgage, but it also provides you with a safety buffer. By paying more now, you will have a reserve of funds you can draw on if you become unemployed or experience an unexpected change in your income.

 

3: Invest The Extra

There are plenty of investment opportunities available. The right one for you will depend on your appetite for risk and your understanding of the investment market. Things like property or shares can be a good option, or you could simply increase the amount you put into your KiwiSaver.

Investing always carries a certain amount of risk, so you definitely want to seek expert advice before making any decisions concerning your hard-earned cash.

 

4: Build An Emergency Fund

While contributing additional funds to your mortgage or KiwiSaver is a good financial investment, it does make it hard to access your money if you need it suddenly. That’s why diverting the money saved on your mortgage payments into an emergency fund can be a great idea.

Ideally, every household should have enough to cover three to six months of expenses tucked away. This safeguards you in case anything happens to your current income.

You can simply keep this money in a savings account or in a low-risk fund like a term deposit. Just remember to check the fine print to establish how easy it is to withdraw the funds if needed.

 

The Right Decision For You

All four of the options we’ve just detailed are viable choices for a stronger financial future. Deciding which option is right for you will depend on the equity you have in your property, your current finances, your future goals, and your appetite for risk.

The friendly team at Mortgage Suite would love to chat through the options to help you decide how your future could most benefit from the reduced interest rates. Reach out to us today!

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

Posted on by mortgage_admin
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

Posted on by mortgage_admin
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?

Posted on by mortgage_admin

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?

Posted on by mortgage_admin
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!

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