Refixing? Here’s some things to think about

September 5, 2023

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For many the time to refix their home loan is drawing near. As the clock ticks on your current interest rate term it can be scary pondering what your next move may look like as you search the web far and wide for that perfect rate. The truth? There is no ‘best deal’ or ‘perfect rate’. When it comes to choosing a new term there’s no one size fits all. Only you can determine what works best for you and often it’s better to assess your life situation and what rate will give you the most stability and reassurance both right now and over the life of your mortgage.

How long do you plan on staying in this house?

Think about your life circumstances and how you will manage risks appropriately. Specifically, how long you can commit for. What are the chances you decide to sell your house, move cities, outgrow your existing house and upsize? Finding the best rate in the market at the time you refix can be attractive but not always the best approach. Fixing for too long could mean if you end up needing to sell and repay the lending, you will be subject to a potentially large fixed-rate break cost which does factor in how long you have left on your current term. Or maybe you’re happy to take a risk with fixing for a shorter term and be faced with a new interest rate environment which could be higher or lower than what we have today.

What does certainty mean to you?

An important question to ask yourself is how much certainty do I need right now? If you’re worried about making repayments, just as we mentioned above, make sure you weigh everything up. Just because you may find the best rate in the market, doesn’t mean it’s the best rate for you. Does it suit your personal circumstances or future life goals?

Is just one principal loan right for you?

Consider splitting your loan into multiple terms. This helps smoothen any changes you may face. Just say you have two or three fixed terms expiring over a three-year period, only shifting 1/3 of your loan every so often makes the refixing journey less tumultuous. If you split your loan equally into three portions and had one portion expiring each year, as interest rates have increased, it would take you three years before all your lending was on the higher interest rates. But keep in mind that this almost means if rates go down, it would take three years for you to receive the full benefit of lower interest rates.

Use the expertise of your bank to help you

If you are worried about refixing your loan, the best thing you can do is reach out to your bank early. While you might refix one of your loans once every year or even less, banks have these conversations every day. If you’re not sure on what is going to work for you or some of the things you need to consider, reach out to them and leverage their expertise. The earlier you reach out the better prepared you can be.

At Kiwibank we can walk you through the process and help discuss what options are available to you. Owning a home is a fantastic achievement and we are here to support you every step of the way and equip you to be better off.

Nicole Pervan

Nicole is the General Manager of Home Lending at Kiwibank – the largest New Zealand-owned bank. Nicole has spent her career working in financial services in Australia, Europe, and New Zealand across a range of disciplines including product management, sales, risk, and change.
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DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.

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Refixing? Here’s some things to think about

How long do you plan on staying in this house?

What does certainty mean to you?

Is just one principal loan right for you?

Use the expertise of your bank to help you

Nicole Pervan

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