If you have a mortgage rolling off in the next few months, the conversation around whether interest rates will rise again matters more than ever. With inflation pressures still lingering and wholesale lending markets already shifting, now could be the time to prepare your mortgage before higher rates flow through to borrowers.
Why Interest Rates Could Rise Again
Inflation is still running above 3%, and that creates a problem for the Reserve Bank. When inflation stays elevated for too long, interest rates often need to remain higher to slow spending and reduce pressure across the economy.
One of the biggest concerns right now is the rising cost of oil and fuel. New Zealand relies heavily on petrochemicals across transport, freight, and production, meaning higher fuel prices can push up the cost of almost everything — from groceries through to business operations.
Even if oil prices ease in the short term, inflation can take time to work its way back out of the economy because supply chains don’t recover overnight. Wholesale lending markets are also becoming more expensive for banks, which means mortgage rates can begin increasing before official Reserve Bank announcements are even made.
That combination has many borrowers wondering whether another round of mortgage rate increases similar to 2023 and 2024 could be ahead.
How To Prepare Your Mortgage Now
For borrowers with fixed terms expiring later this year, understanding your options early may provide more flexibility.
One of the first steps is checking when your current mortgage rate rolls off and reviewing what repayments could look like if rates rise again. Even small increases in interest rates can make a noticeable difference to monthly cashflow.
Another important factor is understanding break costs. These are the costs associated with ending a fixed mortgage early and are influenced by wholesale interest rates and how the bank has structured its lending. Depending on market conditions, some borrowers may find break costs are lower than expected.
Banks will often allow borrowers to secure a new fixed rate before the current one expires, with many lenders offering pre-fixing windows around 40–60 days before rollover.
For some borrowers, locking in a rate slightly earlier may help reduce the risk of rolling onto higher interest rates later in the year.
Moving House? You May Not Need To Break Your Mortgage
Many borrowers assume moving house automatically means breaking their existing mortgage, but that is not always the case.
A “security swap” allows borrowers to transfer an existing mortgage from one property to another if both properties settle on the same day. Instead of breaking the loan entirely, the bank simply swaps the security underneath the mortgage.
This can be particularly useful for borrowers who secured lower fixed rates previously and want to keep part of their lending at that rate while upgrading homes or purchasing another property. Any additional borrowing would usually be taken at current market rates.
Why Reviewing Your Mortgage Early Matters
Nobody can predict interest rates with certainty, but waiting until your fixed term expires can leave you with fewer options if rates move quickly.
Understanding your break costs, repayment exposure, and refinancing options ahead of time may help create more certainty around your mortgage position especially in a market where rates are already beginning to creep higher.
Key Takeaways
- Inflation remaining above 3% could place upward pressure on interest rates
- Rising fuel and transport costs can flow through into broader inflation
- Mortgage rates can increase before Official Cash Rate changes occur
- Borrowers may be able to secure rates before their fixed term expires
- Break costs vary depending on wholesale lending conditions
- Security swaps may allow borrowers to move house without losing existing fixed rates
- Reviewing your mortgage early may provide more flexibility if rates rise again
- Speaking with a mortgage broker can help clarify your options before rollover
Next Steps
If you want to better structure your property portfolio, optimise your lending, and make sure your setup is working as efficiently as possible, register for Lighthouse Financial’s upcoming webinar with Matt Harris, Head of Tax and Accounting.
If you’d like to watch more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
