Cost of living: Why talking to your bank about rising home loan rates should be your first step, not your last resort

  • 12/12/2022
  • Sponsored by - ANZ
Cost of living: Why talking to your bank about rising home loan rates should be your first step, not your last resort
Photo credit: iStock

The increased cost of living and rising interest rates are making things tough for many Kiwi families.

Our inflation rate currently stands at 7.2 percent, a 30 year high. In a bid to bring this back within the target range of 1 - 3 percent, the Reserve Bank of New Zealand (RBNZ) is hiking the Official Cash Rate (OCR) to try and slow down spending and cool the economy.

The OCR can impact home loan interest rates charged by the banks, and may make borrowing more expensive. 

For people who haven't experienced rising interest rates this can be daunting, particularly home owners who are rolling off low fixed rates when floating and fixed rates are now much higher.

So what can we do to manage our finances as we find ourselves facing higher mortgage repayments?

Firstly, ANZ offers a range of free online tools that can be used to assess financial wellbeing and may provide tips on how to handle the higher costs.

ANZ Home Loan Coach Tae Hyun Kim said it isn't in anyone's interests for people to get into financial stress. Banks have teams ready to talk through options, including how to maintain financial wellbeing when costs are rising.

"We encourage anyone who wants to talk about their finances or who has concerns to get in touch. There are steps you can take to manage your home loan and there may be options to relieve some financial pressure," Kim said.

"We're keen to talk with customers sooner rather than later to see if, for example, we can structure their finances differently.

People shouldn't be nervous about talking to their bank, we're here to support customers, and may have options, tools, and information that may help." 

It's all well and good a bank telling people to come and ask for help in these tough economic times, as customers may be wary that it might impact future borrowing decisions.

"At ANZ, we'd encourage our customers to focus on accessing the information and support they need to help them make informed decisions about their finances," Kim said.

"Talking to an ANZ Home Loan Coach can help give them guidance and support to get through challenges they might be facing right now, while considering their long-term financial wellbeing. We're here to help New Zealanders achieve their financial goals - whether that is getting ahead or just getting through this tough time."

Currently, around 90 percent of ANZ Home Loans are on fixed rates and most of ANZ's customers are in a sound financial position. However, with many rolling off fixed interest rates onto higher rates over the coming year, some will come under financial pressure. 

Kim says how people deal with that pressure will vary, as everybody's situation is different.

"Planning ahead really helps, so think about what your budget will need to look like if your home loan repayments are higher. Using ANZ's home loan repayment calculator could be a good way to make a start.

An option, if you can, is to build up your savings to provide a buffer for when costs start to rise."

No one has a magical crystal ball that can tell them what home loan rates will be doing in a year or two from now with any certainty. However, recent commentary from the RBNZ indicated the OCR would need to go higher than they previously thought to get on top of inflation, forecasting the OCR may now peak at 5.5 percent in September 2023. 

"The cost of living and rising interest rates are having an impact on everyone to some extent," Kim said.

"We encourage people to plan for this and ensure you are aware of all the options you have to manage repayments in a rising interest rate environment."

What about buying your first home and getting onto the property ladder? 

Another factor impacting the market is falling house prices, which means for those keen to get onto the property ladder there could be a wider range of properties in reach. But it's important to keep in mind higher interest rates will impact how much you may be able to borrow and how much you could afford to repay. 

Banks usually assess affordability at higher rates than those advertised (sometimes called 'servicing sensitivity rates') to take into account that rates may rise over time and to ensure repayments will still be manageable for customers. When advertised rates are higher, servicing sensitivity rates go higher as well.

"Home ownership is the goal for many New Zealanders and we want to ensure we do our bit to help Kiwis into homes," Kim said.

"A big part of that is lending responsibly and we want to understand their current and future goals, how they like to do their banking, their income stability, and budget.  

You need to consider your own financial wellbeing, including what's important to you, and how comfortably you can meet current and future financial commitments."

Whether you're about to buy your first home and want guidance on the best mortgage options or you have a home loan already and are keen on discussing your situation amid the interest rate rises, ANZ's message is to get in touch.

It's free to chat with one of their Home Loan Coaches about the options available to you - so you've got nothing to lose by reaching out. 

Article created in partnership with ANZ

ANZ lending criteria, terms, conditions, and fees apply to ANZ home loans.

This material is for information purposes only. ANZ recommends seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 269 296, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see