Mortgage rates have bottomed out. Here’s the conversation you actually need to have with your bank now

Thursday, 27 November 2025

Timing the interest rate cycle can feel a bit like jumping off an ocean pier. Go too early and you could get smashed by the regret that comes with watching rates go even lower. Go too late, and you end up bellyflopping into the realisation that you would have been better off if you had just gone a little earlier.

Over the last year, we’ve seen the official cash rate steadily trend downwards, going from 5.5% in 2024 to 2.25% after this week’s drop.

The next OCR announcement will happen in February next year, but bank economists widely believe we are near the bottom of the current cycle – which means interest rates are unlikely to go much lower.

The most significant move off the back of this came from the Co-operative Bank, which dropped its floating rate to 4.99% – the first time we’ve seen a sub-5% floating rate in years.

So far banks have maintained fixed rates at roughly 4.45%, with TSB offering a particularly competitive 4.39%.

There’s no shortage of opportunity for mortgage holders to get better deals right now, especially given the strong competition among banks vying for more signatures.

Here's what you need to know and do to get the best deal possible.

How much money is at stake?

Around 33% of mortgages are either on floating rates or set to refix by March 2026, which means many will finally have some respite from the heavy interest rates they’ve been carrying.

A person locked in at the average rate of 6.5% a year ago could now ostensibly lock in a rate of 4.4%, which would put much more money in the average person’s pocket.

Based on that, weekly minimum repayments on a $500,000 mortgage on a 30-year mortgage could reduce from $730 to $578 – a difference of $152 a week.

Financial adviser Katie Wesney, the head strategic coach at Enable Me, tells me those savings could be compounded if the previous level of repayments was maintained.

Wesney says we tend to fuss so much about a slight variation in interest rates, but looking at paying down the capital is a far better way to make savings in the longer term.

“Kiwis should use this as an opportunity to pay down debt faster because that’s actually the key differentiator in terms of getting ahead and not having to worry infinitely about interest rates,” she tells me.

The numbers are staggering when you look at the difference this can actually make. Maintaining a repayment rate of $730 on the lower mortgage will see you cut 19 years or $227,000 off the mortgage.

When considering your home as an investment, it’s always important to consider that a $1 million house (the median Auckland house price) financed over a 30-year term would see you pay a total $1.7 to $2.1 million over the duration of the mortgage (depending on what rates were doing).

Real long-term savings, says Wesney, come from doing what you can to pay down the capital as quickly as possible.

Data from ANZ has shown that around a quarter of their home loan customers have retained their repayment level, despite their interest rates dropping.

This does two things: it creates a financial buffer by pushing the homeowner ahead of expected repayments while also eating into the capital.

Ask for a cashback

Mortgage Life financial adviser Samantha Wilson tells me banks are currently using cashbacks as a key way to attract customers.

“We are seeing the major banks offering a 1.5% cashback, which is the highest that we've seen in at least over 10 years,' she says.

A cashback of this magnitude would equate to around $12,000 on an $800,000 mortgage, a substantial figure for any family.

The most attractive cashback rates are usually reserved for new customers refinancing from a competitor, or for a new home purchase (but existing customers should always ask the question).

With numbers that large, there’s certainly an incentive for homeowners to shop around and see what other banks are willing to fork out in exchange for your business – even if this is only used as a negotiating tool to see what your bank is willing to offer to retain your business.

But this comes with an important caveat.

“There will always be people who chase cashbacks or lower interest rates, but this isn’t the best strategy for everyone,” says Wilson.

“You need to question whether this is putting you in the best possible position long term.”

Watch the break fees

Even those who aren’t reaching the end of their fixed term might be tempted to jump ship to another bank when looking at those attractive cashbacks and lower interest rates, but that could be a mistake.

Wilson says you need to ask your bank about their break fees and then do a calculation on whether it makes sense financially.

Break fees can range from zero up to tens of thousands of dollars, and the estimated financial loss of the bank, the time remaining on the loan period and the difference between the rate at which you fixed and the current lower rate.

If you get your calculations wrong, it can take months for the lower interest rate to actually deliver a material difference – if it even does at all.

“I've just had an example of a pair of clients who probably face 18 months before they are going to have a true benefit because they have to pay off the break costs,” says Wilson.

“But then again, for some people, the cash flow is much more needed right now. There are times when people have to do it because they could do with that extra $300 a fortnight.”

It’s about more than interest rates

Jonathan Smith, a financial and mortgage adviser at Fundsmart, says a sound mortgage strategy requires you to look at three different factors.

He says you should look at the products being offered, the service level and then also the interest rates.

All these combined will often lead to a better result than just chasing the lowest interest rate.

“You don't create wealth or long-term wealth by chasing interest rates, but it can help having those lower rates,' says Smith, pointing to the example of how the right banking product could make a huge difference.

Smith says that something like an offset product could lead to savings that exceed any gains you might make from the small difference in interest rates.

An offset loan allows you to defer interest payments on a portion of your mortgage as long as that is offset by cash in your bank account. It’s one way of putting your emergency savings to good use.

Say for instance, you have $20,000 in your emergency account. An offsetting product would allow you to separate a $20,000 portion of your mortgage, which you would then not have to pay interest on. This one move alone would save you $1000 in interest repayments over the course of a year.

What you need to say to your bank

Speaking to your bank can be daunting, but it’s important to remember that they want to keep your business (they’re literally throwing money at customers to do it).

Here’s a simple guide on how to talk to your bank about updating your mortgage:

Start with the OCR: Mention that you’ve been keeping a close eye on the OCR and that you’re calling to discuss your mortgage rates to ensure you’re getting the best details.

Raise competitor rates: If you’ve spotted a better rate with a competitor, make sure you raise this. In most instances, banks will match what their competitors are offering.

Product enquiry: Ask about the products that are available and how they could enhance your long-term wealth plan. Quite often, banks will have great products that you don’t even know about.

Retention fee question: While banks give cashbacks to new customers, they will sometimes also pay a retention fee to keep a customer. This will likely not be as high as a cashback, but you will not get anything if you don’t ask.

Stand strong: If the bank pushes back and claims that they can’t offer you anything else, tell them that you are in conversation with other institutions and that you will switch if a competitor offers something better. This works even better if you already have an offer that you can put in front of the bank.

Know when to stop: If you’ve gone to other banks and you’re not getting a much better deal and your current bank isn’t willing to budge, then it might just be the case that you can’t get any better. If you’ve hit a wall, then you could resort to a mortgage adviser to see if there are any other options available.

What not to do

As much as there are certain things you can do to help yourself, there are also things you should avoid doing.

Don’t refix too early: It has never been easier to refix. A simple click in the app can lock you in for another three years. Even when you get the alerts, don’t do this too early. You should always weigh your options first. It’s in the best interest of the bank to have you locked for another fixed term.

Don’t threaten to leave unless you mean it: The bank might call your bluff, so you should only do this if you have genuinely researched alternative options. If you don’t want to do that research yourself, then get a mortgage broker to help.

Don’t take on too much: If you own more than one property or you have a complex lending structure, then you might be better suited to get the professional help of a mortgage broker. They understand the full suite of products and services at every bank and will be better placed to find a solution that works best for your circumstances.

Preparation goes a long way

Before making any decisions, it pays to do your homework. Coming to your bank with a plan and preparation will go a long way toward getting what you want. Here’s a rundown of what you need:

Current loan details: Understand your current loan agreement. When did it start? When does it end? And do you have different parts to your loan?

Competitor rates and products: Do your research on what competitors are offering in terms of products and rates. Being armed with this information will make the negotiation flow far better. Just saying that you heard about a better rate elsewhere won’t cut it. You need to come with the receipts.

Break fees: Calculate those break fees carefully and stick with what you have if the numbers don’t quite add up. Switching shouldn’t put you under more pressure. It should be a financially savvy decision.