What to think about when your home loan fixed rate is ending

BNZ’s General Manager of Consumer Lending shares his thoughts on what to consider when your home loan’s fixed rate is coming to an end.

3 minute read

If your home loan’s current fixed interest rate is about to expire, you might be looking to re-fix at a new term. But what about reviewing and restructuring? Or rolling over to a variable rate?

Locking in a little certainty

Most New Zealand homeowners opt for fixed interest rates and repayments. When interest rates are decreasing, people tend to lean more towards shorter fixed rate terms, which lets them re-fix sooner when a new, lower rate may be available. But when interest rates are rising, it can be tricky to know what to do. 

How do you choose what’s best for you? A lower rate for a shorter term, or a higher rate with fixed repayments for longer? What’s most important for you? Lowest rate, or more certainty over the longer term?

• Longer term fixed rates are designed to give more certainty, with home loan repayments fixed across a longer period.
• Shorter terms usually offer the lowest rate, providing certainty around home loan repayments for a shorter period of time.

Reviewing (and maybe restructuring) your home loan

There are a number of options designed for those on variable incomes.

One option is to split the home loan into a few chunks, putting the bigger chunk on a fixed rate and the smaller amount on a variable rate (usually a higher interest rate) – this structure aims to help pay down the smaller variable portion more quickly (potentially saving  interest, and avoiding an early repayment charge).

Another option is to split a loan into different fixed-rate terms. This structure aims to provide the opportunity to make lump sum payments when one of those chunks comes off its fixed rate, without needing to pay an early repayment charge.

It’s obviously more complicated having multiple loans, with different amounts and repayments, so talking to a banker can help you decide if this would work.

If flexibility is (much) more important

The other option available is a simple rollover from a fixed rate onto a variable rate. A variable rate is usually higher but it’s designed to give homeowners the flexibility to make lump sum repayments without incurring an early repayment charge.

How to choose

Broadly, it’s about what’s going to help the homeowner sleep better. Knowing what their repayments are for the next 12 months? The lowest rate? Flexibility?

Figuring out the answers to these questions can help decide what could work best.

When’s good

Generally, it’s seen as a good idea to start thinking about what to do at least a few months before a fixed rate expires. Homeowners wanting to make changes to how their home loans are structured, might want to contact their banks as early as possible to allow enough time to work through all the details and paperwork.

For those wanting to keep the structure the same and just select a new term and rate, they may be able to do this online. BNZ customers can select a new term and rate from 60 days before their fixed term ends – simply by opening their Internet Banking or the BNZ app, clicking on their home loan with the rate and term that’s soon to expire, and following the prompts. Ratelock break fee and early repayment charge may apply.

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This article is solely for information purposes and is not intended to be advice with respect to any matter discussed in it. If you need help, please contact BNZ or your professional adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.

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