Mortgage holders missing a trick as interest rates look set to rise

  • Nearly seven out of 10 don’t plan to change their mortgage
  • 70% think interest rates will rise this year
  • 80% of people who think interest rates will rise believe they will rise by less than 1%
  • 24% of people say they regularly monitor interest rates and proactively restructure their mortgage

The release of the BNZ Financial Futures Research highlights that most people are unlikely to effectively prepare for this year’s expected interest rate rise by reviewing their mortgage.

Anthony Healy, BNZ chief executive, says the research shows there is a disconnect between what people think and how they are planning to respond.

“We found that 70% of mortgage holders believe that rates are going to rise this year. They’re also doing their homework because most are forecasting a rise of less than 1%, which is what most experts are predicting. But despite being aware of this, nearly seven out of 10 people confess they have no plans to change their mortgage.

“We’ve had two years of the lowest interest rate environment in a generation but it is frustrating to see that New Zealanders still seem to have a ‘set and forget’ or ‘she’ll be right’ mentality about their home loan.

“New Zealanders need to get savvy about updating their mortgage structure regularly, rather than being apathetic. Now’s an opportune time to ensure your mortgage suits the rates environment and your lifestyle. We’re on the cusp of a change, but it’s not necessarily going to be dramatic this year,” says Mr Healy.

Only a quarter (24%) of homeowners with mortgages say they regularly monitor interest rates and proactively restructure their mortgage.

“I urge mortgage holders to make the most of the low rates environment and talk to their bank about the changes they should be making,” says Mr Healy.

He suggests that part of the problem may be that New Zealanders don’t realise how small changes to their mortgage can have huge impacts in terms of reducing both the amount of interest they pay and how long they have their mortgage for.

“If we look at a $300,000 mortgage with 15 years left. Increasing fortnightly mortgage repayments by $100 will shave one year and nine months off your mortgage, as well as save nearly $16,000 in interest.

“But when we asked people how much time they believed they’d save by making small increases to repayments, they underestimated the positive impact it’ll have. New Zealand homeowners will be pleasantly surprised at how much they can save by making a small change now, which may just mean they have more financial freedom to do things like invest, retire earlier or travel,” says Mr Healy.