We have updated this blog as of Jan 2025. Please check out the updated blog here.

Are you concerned with the size of your mortgage repayments and worried about interest rate hikes? Have you considered negotiating with your bank for a better interest rate? Interest rates are influenced by many factors, such as the official cash rate set by the Reserve Bank of New Zealand, the cost of funding for banks, the demand and supply of credit, and the competitive pressure among lenders.

However, did you know that the rate that your bank advertises is not necessarily the best rate that you can get? Here are some tips on how to negotiate a better interest rate from your bank in the current financial climate.

Do your research

Before you call your bank, check what rates they have available on their website and compare them with other banks and lenders. You can use online tools such as interestrates.co.nz or globalfinance.co.nz to find the best deals in the market. This will give you an idea of what rate you are trying to beat and what options you have if your bank doesn’t offer you a satisfactory deal.

Be prepared

Have your financial information ready, such as your income, expenses, assets, liabilities, also your credit score, and loan-to-value ratio. This will help you demonstrate your ability to repay the loan. You should also have a clear goal of what interest rate you want and how long you want to fix it for. Be realistic but assertive in your expectations

Ask for a discount

Call your bank and speak to someone on the home loan team. Explain that you’re looking for a better interest rate and ask them what they can offer you. Don't be afraid to mention that you have done your research and that you are aware of the rates offered by other lenders. Even if they offer you a rate that is lower than their advertised rate, ask them if they can do better. If they offer you a rate that is higher than their advertised rate (and this does happen sometimes), ask them why and challenge them politely.

Negotiate other benefits

Interest rate is not the only factor that affects the cost of your mortgage. You should also consider other benefits such as cashback, fees, repayment flexibility, offset accounts (If you hold money in an offset account over a period of time, you can reduce the amount of interest charged on your home loan), redraw facilities (lets you access extra repayments you've made on your home loan), and loyalty programs. Sometimes, your bank might not be able to lower the interest rate further, but they might be able to offer you other incentives that can save you money or make your loan more convenient.

Be prepared to switch

If your bank is not willing to negotiate or offer you a competitive deal, you should be prepared to switch to another lender that can meet your needs. However, before you do that, make sure you factor in the costs and benefits of switching, such as break fees, application fees, valuation fees, legal fees, and any cashback or discounts offered by the new lender. You should also check the terms and conditions of the new loan and make sure they suit your situation.

You can benefit from negotiating with your bank for a lower interest rate on your loan. This could save you thousands of dollars over the life of your mortgage and mean you pay off that loan faster. However, it does require some research, preparation, communication skills, and persistence – yes, keep trying!

If you need help with this process, you can make contact with us at marketing@bfa.co.nz and we will put you in contact with one of our team, or you can consult a professional mortgage broker who can act as your advocate and negotiate on your behalf with multiple lenders.