In recent weeks, we’ve seen a flurry of heavily discounted, “under the line” mortgage rates from some New Zealand banks, as they struggle to hit home loan targets in the wake of a floundering property market. As more first home buyers enter the market encouraged by lower house prices, and some existing homeowners near the end of the fixed term portion of their home loan, it’s timely to remind borrowers of the importance of comparing interest rates to ensure you’re getting the most competitive rate available to you.

The secret interest rate war

Bank of New Zealand (BNZ) recently confirmed a time limited offer of 4.99% for one-year fixed-term home loans, for new loans that are brought to the bank by mortgage advisers. Currently, the same loan term is being advertised online at 6.54%.

Another big bank offered loan rates of 5.99% for an 18 to 24-month loan term, well below advertised rates, while one-year advertised interest rates from other big banks range from 6.49% to 7.49%, depending on how much equity borrowers hold.

According to independent economist, Tony Alexander, some New Zealand banks are heavily discounting the one and two-year fixed rates behind closed doors, as they struggle to hit home loan sales targets, and are lending at “under the line” rates.

Property sales have fallen well below historical levels not seen since the mid-1990’s. According to data received from the Reserve Bank of New Zealand Te Pūtea Matua, in December 2020 banks lent just over $9.6 billion in new home loans. In December 2021 that fell to $7.9b, and in December 2022, it was just $5.1b.

But it's more than just interest rate…

As a mortgage is likely to be your biggest financial commitment, and possibly the longest over your 20 to 30 year loan term, every dollar saved makes a significant difference. While the best home loan deal is often the one with the lowest interest rate, there are other features that are just as important in helping reduce the overall cost of your home loan.

Working with a mortgage adviser will help you to understand which of these features is likely to be most beneficial in helping you saving money:

1. Extra repayments. If you’re able to make extra repayments from time to time, you may be able to reduce your balance faster and save on interest.
2. Offset mortgage account works by offsetting money you have in your bank account against your mortgage balance, so you only pay interest on the difference.
3. Split interest rate means part of your home loan is fixed across a range of loan terms with some tied to a variable interest rate, combining flexibility to pay extra when you can on the variable part of your loan with the certainty of fixed repayments.
4. Redraw facility lets you redraw some of the money you’ve paid into your loan to use for other things, like travel, a new car, or a home renovation.

Time to book a mortgage review

One of the best ways to determine whether you have the most favourable interest rate available to you is to book a mortgage review with a Mortgage Express branded mortgage adviser. During your meeting, a mortgage adviser will assess your current mortgage and financial situation, and help you determine if there are more favourable options available to you that could save you money.

As Mortgage Express branded mortgage advisers work with a panel of lenders – both bank and non-bank – we have access to the most up to date interest rates and loan terms, and can help you make an informed decision about your finances and mortgage. Contact Mortgage Express to get started.