Thinking of Switching Mortgage Companies? Here’s What You Need to Know

by Jun 5, 2019Mortgages, Property investment

Current economic conditions are making mortgage refinancing an attractive option for many homeowners in New Zealand.

As you may have heard, a number of the big banks recently slashed their fixed term interest rates. Depending on your situation, you could potentially save thousands over the course of your mortgage by switching to a new mortgage company and securing a new fixed rate home loan.

Read on to learn more about why banks are cutting their rates and what it means for you.

A quick recap on mortgage refinancing

Mortgage refinancing is a strategy that can help you meet your unique financial goals. It involves shifting your mortgage to a new lender in order to obtain a better interest rate or mortgage term.

There’s just one catch.

Most fixed loans come with hefty break fees. If you want to break the terms of your contract by getting out of your existing mortgage early, your lender will charge you a break fee to cover the interest they would have earned over the time remaining on your loan.

Break fees are based on complex formulas that vary slightly from lender to lender. You can use the mortgage break fee calculator over at to get a rough idea of your break fee.

In addition to a break fee, you might also be lumped with some administration fees.

The start of the mortgage war

Historically, the cost of break fees has typically outweighed the benefits of refixing. However, this has started to change in recent weeks as many of the major mortgage providers jostle for customers in an increasingly competitive financial climate.

In November 2018, ANZ caused a stir in the industry when it began offering a one-year fixed-term 3.95 percent mortgage rate – the first major bank to do so since World War II.

A number of other lenders have since raised the ante. Three of the four major banks – ASB, BNZ and Westpac – are now offering 3.95 percent rates over three-year fixed-term home loans. For comparison, the average two-year rate was around 4.5 percent just six months ago.

What’s sparked this trend? There are a couple of key factors at play:

1. Increased competition

Firstly, there are the tougher lending laws. A few years ago, the government introduced new laws restricting the amount of low-deposit mortgage lending. These changes effectively made it more difficult for borrowers to get a loan, which has meant fewer new customers for lenders. This has encouraged mortgage companies to offer more competitive rates in an effort to attract new customers.

2. Low OCR

Secondly, there is the low official cash rate (OCR). The Reserve Bank of New Zealand recently announced that it would probably cut the OCR from its already record low of 1.75%. Many lenders have chosen to pass these savings onto their customers by offering reduced fixed home loan rates.

Should you refinance?

While some people will certainly benefit from switching to the new fixed rates, others will be better off avoiding the break fee and sticking with their current mortgage provider.

Whether or not you should switch to a new home loan hinges on your specific circumstances. The amount of money you could potentially lose or save by refinancing depends on a number of factors, including your current rate, the rate of the new home loan, the time remaining on your existing loan and how your lender calculates its break fee.

Contact your local mortgage brokers

Regardless of whether you could save or lose money by switching, this is the perfect time to consider your options. The current competitive market favours borrowers quite heavily, and many mortgage companies are going out of their way to retain existing customers and attract new ones.

If you’re thinking about switching home loan products, we’re here to help. As independent mortgage brokers with more than 20 years of experience in the industry, iLender is the provider of choice when comes to getting a home loan in Auckland.

Contact us for a review of your situation by giving us a call on 0800 536 337 or email us at

About iLender

At iLender we put your best interests first and not the Bank – our advice is unbiased as all Lenders who we do business with pay about the same in commissions.

Although we are Auckland based Mortgage Brokers, we help customers everywhere in New Zealand and overseas with buying property in New Zealand, as we are very much about online and giving advice here and now!

The 5 big benefits of Property Investing

Rental property is a popular and profitable form of investment. Buying the right investment property can provide strong capital gains and regular income, while being able to leverage real estate opens up new opportunities for creating wealth.  Thinking about...

How to get a mortgage when you are Self-Employed

There’s a lot to be said for working for yourself. Whether you’re a freelancer, contractor, or small business owner, striking out on your own offers a sense of opportunity that’s hard to find in salaried roles. However, self-employment can make things tricky when it...

Government Housing policy changes – March 2021

Can they work or is there ‘an elephant in the room’? A lot of comment has been made around the Government’s changes to Residential Property Investment over the last few days, so I thought commentary from me, with nearly 30 years in Property Finance, might bring some...

What kind of loans can I get with bad credit?

A few financial slip-ups in the past can have a surprisingly big impact on your credit rating. A bad credit rating indicates that you may be a risky borrower, which can make it difficult to get the bank’s approval when the time comes to apply for a home loan....

LVR changes and what do they mean for you?

Background In 2013 the Reserve Bank introduced LVR restrictions to curb a potential overheating of the property market. As a rule, owner occupiers needed a 20% deposit and investors 40%, later reduced to 30%. There was some leeway with banks able to lend a very small...

Getting a home loan: What to do when the bank says “No”

It’s easy to feel discouraged when a bank rejects your home loan application, but it’s important that you do have other options when it comes to securing a mortgage. Non-bank lending can be an excellent option for home buyers who have had their mortgage applications...

Credit searches – What to know before you apply for a Mortgage or Loan

All Lenders use a credit search as part of their assessment of a Mortgage or Loan Application and there are some things that are important to know. Some Lenders use a credit scoring system, some don’t. Credit Scoring Mainstream lenders use a credit scoring system and...

More Reasons To Be Cheerful

Upturn in House Prices… A couple of the major Banks are predicting house prices to increase by up to 7 per cent next year with the property market due to "spring back to life". This is a welcomed announcement as it comes on the back of a fairly quiet winter - so signs...

Can I get a home loan with bad credit?

Getting a mortgage can be challenging if you have bad credit or no credit history. Banks tend to perceive you as more of a risk and are generally less inclined to approve your home loan application.  But that doesn’t mean it’s impossible to get a mortgage. Here...

The truth about mortgages, interest rates, the housing market and everything else the media likes to sensationalise!

  'House prices down' 'First home buyers finding it impossible' 'Investors exiting the market' Such headlines are gross exaggerations and often blatant misrepresentations of the truth. The Housing Market This is flat, but stable. QV (NZ's leading provider of...

Best mortgage rates, 10% deposit owner occupied and 20% rental purchase, self employed with no financials and help for those with bad credit or arrears.

Hundreds of reviews on TradeMe and Google makes us your ‘Number 1’ choice.

Call 0800 536 337