$17 billion rush to repay home loans early as households feel relief of lower mortgage rates

Thursday, 14 August 2025

Record levels of borrowers have been making extra mortgage repayments, ASB says.

“Customers have made $17 billion worth of additional payments to pay down their home loans,” ASB chief executive Vittoria Shortt said on Wednesday.

That figure represents people making extra home loan repayments above their scheduled repayments between July 1 last year and June 30 this year.

Shortt, speaking after ASB revealed a slight dip in profits, said it was one of the signs that things were improving as lower home loan rates fed through into more indebted households, freeing up their cashflow to reduce debt faster.

“We use 6% as the benchmark for what is a lower rate. Sixty per cent of our customers are now on lower rates, and we still have 40% to flow through,” she said.

The $17b figure comes from Reserve Bank Te Pūtea Matua data on loans where actual repayments were greater than scheduled repayments, and represents an increase from the normal extra repayments made in a year by people trying to save themselves interest and cut the length of their mortgages.

The $4.6b of extra repayments made between April 1 and June 30 was $547m more than in the same quarter last year, and was the highest level of extra repayments on home loans since records began in 2014.

The Reserve Bank has cut the official cash rate to 3.75%, the lowest in two years. Banks have already lowered home loan rates, with further reductions expected. Homeowners and retailers could benefit, but economic uncertainty remains.

The $3.9b of extra repayments made in the pinched post-Christmas period between January 1 and March 31 was $518m more than in the same quarter last year.

All banks allow people to make extra voluntary repayments on home loans up to a certain amount each month, and some allow people to make one-off lump sum repayments without charging an early repayment fee, but only up to a certain amount.

ASB allows people to voluntarily increase their fixed interest rate loan repayments by up to $500 per fortnight or $1000 per month without incurring an break fees, as long as they commit to those regular increased payments for the remainder of the fixed rate term.

Westpac allows borrowers to increase their repayments fixed home loan by up to 20% above the minimum at any time, but warns early repayment fees are likely on lump sum repayments.

People can make lump sum repayments on a variable rate loan without incurring any early repayment fees at ASB, which is also common at other banks, and is always the case on revolving credit portions of mortgages.

Some banks allow fee-free one-off lump sum repayments too.

ANZ, for example, allows borrowers with fixed rate loans to make an extra lump sum repayment that’s no more than 5% of their current loan amount.

BNZ also has a 5% annual extra lump sum limit before early repayment fees may kick in.

It’s not only voluntary repayments people are using to try to clear mortgages earlier, Reserve Bank data shows.

Vittoria Shortt, chief executive of ASB, says “customers have made $17 billion worth of additional payments to pay down their home loans”.

There have been high levels of borrowers switching between banks, which it records in a line of data that covers loans that are repaid in full, though that also includes the repayment of loans in full after house sales.

In the June quarter $14.845b of home loans were “repaid” in full.

In the same quarter last year, $12b of home loans were repaid in full.

ASB’s disclosure statement, published on Wednesday, showed barely any increase in serious arrears on home loans of 30 days or more.

In June 2024, borrowers owing $910m in home loans to ASB were behind on their repayments by 30 days or more. That had risen to $913m in June this year, however, in June last year $376m of loans had been overdue by 90 days or more, considered to be a level at which it was very hard for borrowers to recover from.

By the end of June this year, ASB had $403m of home loans on which the borrowers were behind by 90 days or more.