In December, there was a spike in Kiwis switching their bank in a bid to find cheaper mortgage rates.
This was a record amount since 2017 according to the Reserve Bank, with over $2 billion of mortgage debt changing between lenders during the festive month. As interest rates dipped throughout the year, the Reserve Bank recorded an uptick in home owners switching lenders, including non-banks. If you are a home owner, it’s a good idea to check your mortgage to see if you might be able to switch to a better deal. Luckily, we can help you get free mortgage advice if you’d like to speak with a mortgage advisor about your options.
Bruce Patten, a mortgage advisor at Loan Market, has said he believes that a drop in interest rates in 2024 prompted Kiwi home owners to switch lenders in the hopes of securing cheaper mortgages. He noted that he saw a similar event during the Global Financial Crisis of 2008.
Patten also said that some borrowers, who had fixed, longer term debt, had even broken their loan agreement to change. He believes that even though breaking terms involves a fee, and even a loss of cash incentive paid by the bank, the benefits of the long term lower interest rate outweighed the negatives.
Another reason for lots of bank switching is the increase in Kiwis floating their mortgages or fixing them for short periods of time. In November, there was a record portion of mortgages issued on floating rates at 47%. There was also 46% of mortgage debt issued for a fixed term of 6 months or a year. This scenario can make it easier and cheaper for homeowners to switch banks.
Many homeowners chose to float or fix their mortgages for a short while in the second half of 2024, because many believed that there would be low interest rates coming up. They chose to float or fix with the plan of grabbing a longer term mortgage with a better deal. Remember, it’s a good idea to speak with a mortgage advisor to make sure you are making the right move with your mortgage, if you are considering finding a cheaper loan.
Kelvin Davidson, the chief property economist of CoreLogic NZ said that when people restructure their loans in this way, it makes it a lot easier for them to switch and get a better deal. He also wondered whether borrowers had been pushed into a bid to find a better loan term deal in the wake of high inflation, high interest rates, and increasing unemployment. It’s likely that the dip in interest rates and temptation of incentives set up by lenders to grab business also influenced many Kiwis' decision to switch.
Here at Money Compare, we are all about helping Kiwis make better decisions with their hard earned money. If you are considering switching to a different bank, it’s a good idea to compare all the options available and talk to an advisor. We have partnered with mortgage advisors who are here to answer your questions for free. Simply click the button below and a fully qualified mortgage advisor will be in touch with you.
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