News | Features
19 Jun 2021 6:06
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    Falling Mortgage Rates Your Big Chance To Get Ahead

    It’s hard to believe that less than nine months ago this column featured suggestions for people facing big mortgage rate rises. Now, with floating mortgage rates falling fast, the advice is quite different.

    And while it’s easier to ignore advice when the markets are moving in your favour, wise borrowers will make the most of the current opportunity to boost their wealth.

    Here’s how to do that, for people with different types of mortgages:

    • A floating mortgage: When your lender reduces your payments, stick to your old payment level. Better still, if the rates have fallen more than once this year, stick to the highest payments. You managed to pay then, so why not now?

    Apply the extra money to repaying more off the principal. You will cut many thousands of dollars of interest and several years off your loan.

    That means money that used to go into your mortgage can instead go into retirement savings earlier, which in turn means retiring considerably richer.

    Let’s look at a $100,000 25-year mortgage. At 9 per cent, monthly payments are $839, and total interest paid is about $126,000, according to

    If the rate drops to 8 per cent, payments fall to $772 and total interest to $110,000. But if you stick with $839 a month, you will repay the loan in less than 20 years, and total interest paid will be less than $87,000.

    If the rate drops to 7.5 per cent, payments fall to $739 and total interest to $102,000. But if you stick with $839, you will repay the loan in 18 years and four months, and total interest will be less than $74,000.

    We’re not talking theoretical numbers here. In that second example, you’ll pay $28,000 less in interest. That’s extra money for retirement fun. And if you invest it wisely it should grow considerably before you spend it.

    If your mortgage is bigger than $100,000, the savings from keeping your mortgage payments at the old level will be proportionately bigger.

    If your mortgage is around $200,000, double the amounts. If it is $600,000, multiply the amounts by six.

    • A fixed-rate mortgage: You’re probably stuck with higher-than-market interest until the term of your loan ends.

    It may be worth asking how much the penalty will be if you switch to a floating rate early. But in most cases it probably won’t be worthwhile switching.

    Try to cheer yourself up by remembering that, until recently, you paid lower interest than your neighbour on a floating rate. Over the last few years, you may well be ahead.

    When your term expires, if rates are still lower than on your current loan, you too should try to keep your mortgage payments unchanged, to gain the same advantages as outlined above.

    This may mean that you have to switch to a floating rate. If you prefer the certainty of a fixed rate, consider having part of your loan fixed and part floating. Then you can put extra payments into the floating portion.

    • An interest-only mortgage. Some people took out these loans, or moved to them, when interest rates were higher. However, it’s not exactly uplifting to know your debt stays the same indefinitely, especially in the current declining property market.

    With interest rates falling, you can probably switch to a principal-and-interest mortgage without increasing payments.

    For example, interest-only monthly payments on a $100,000 mortgage at 9 per cent are $750. If your rate drops to 8 per cent, you can repay principal and interest over 25 years at $772 a month or over 30 years at $734 a month.

    © 2021 Mary Holm, NZCity

     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    Disappointment from Taranaki head coach Neil Barnes, that loose forward Lachlan Boshier has been let go by New Zealand Rugby More...

    The Auckland Tuatara will miss a second straight Australian Baseball League season, citing ongoing uncertainty around Covid-19 More...

     Today's News

    Taliban taking back territory as Australian and US forces prepare to leave Afghanistan by September 23:26

    Rugby League:
    Adam Pompey has bounced Rocco Berry out of the Warriors side to play the Knights tomorrow 21:56

    Kanye West "likes spending time" with Irina Shayk and is happy to enjoy things as they progress 21:41

    Law and Order:
    Police say they'll be reviewing their footage from a major gang member's funeral...and following up any infringements 21:16

    Dwayne Johnson has topped PEOPLE magazine's list of 100 Reasons to Love America 21:11

    Cheryl eats a meat-free diet three or four days a week 20:41

    Kelsey Grammer has teased "some things will be different" with the 'Frasier' reboot 20:11

    Sharna Burgess definitely wants to have children 19:41

    Victoria's Secret signs Megan Rapinoe and Priyanka Chopra Jonas in brand makeover bid 19:36

    Reese Witherspoon had panic attacks "for weeks" before filming 'Wild' 19:11

     News Search

    Power Search

    © 2021 New Zealand City Ltd