Mortgage myths and musts

The internet is brimming with finance influencers who promise to radically slash your debt. Just follow their system. Yeah, right. But buried among the clickbait are legitimate strategies that could save you tens of thousands of dollars or help you get on the ladder in the first place. 

With mortgage rates sitting around 5% and banks fighting tooth and nail for your business, it’s worth knowing what actually works. 

Myths that need to die 

Remember when people were told they needed three months of perfect bank statements before applying for a mortgage? No Uber Eats, no KFC, no spontaneous purchases. The story goes that people would become financial angels for 90 days, only to miss out on their dream home when someone else swooped in first. That was true in 2021-2022, but it isn’t anymore. 

When the Credit Contracts and Consumer Finance Act (CCCFA) changes came into force in December 2021, banks started scrutinising every line of your bank statements. A $187 Kmart trip could kill your mortgage application. Netflix subscriptions, daily coffees, and takeaways were all treated as fixed expenses you’d keep paying forever. 

It was ridiculous. Labour rolled back some of the toughest requirements in 2022 and 2023, and then in July 2024, the National-led government made even bigger changes, giving banks far more flexibility in how they assess affordability. 

These days, a good mortgage adviser can now explain to the bank that you’ll cut back on discretionary spending if interest rates rise. So, while gambling, missed debt repayments, and cash advances will still tank your application, the occasional splurge isn’t a dealbreaker. 

You don’t need to “build credit” in New Zealand 

Unlike in the US and UK, where building a credit history actually matters, Kiwis don’t need to take out a credit card to prove they can handle debt. Banks assess your income, expenses, and whether you’ve missed payments on existing debts. 

Here’s a tip: Lower your credit card limit or cancel the card entirely before applying for a mortgage. NZ banks treat your credit limit as potential debt, even if the card sits unused in a drawer. If you’ve got a $20,000 limit and a zero balance, the bank still factors in that $20,000 when calculating how much you can borrow. 

The 20% deposit myth 

Some aspiring first home buyers grinding away to save 20% don’t realise they could buy with as little as 5% through schemes such as Kāinga Ora’s First Home Loan. 

Property expert Vanessa Williams says first home buyers consistently underestimate how close they are to buying because they assume 20% is the minimum. What they also fail to realise is that you don’t have to pay for a mortgage adviser to access the finance – the bank pays them. 

What actually works: small changes that compound over decades 

• Fortnightly payments

If you cut your monthly mortgage payment in half and pay that amount fortnightly, you’ll make the equivalent of one extra monthly payment per year. That’s because there are 26 fortnights in a year, not 24. On a typical Kiwi mortgage, this alone can save more than $30,000 in interest over the life of the loan. It’s a way to fool yourself into overpaying without feeling the pinch. 

• The power of $20 a week

Andrew Chambers from Tella Home Loans says the math on accelerated repayments is simple: it’s the opposite of compound interest on your savings. The less principal you owe, the less interest you pay, and the faster your mortgage disappears. An extra $50 a week will noticeably speed up repayment. An extra $400 a week on a 20-year, $500,000 loan at 5% would almost cut the loan life in half and save $145,300 in interest. 

• Negotiate your rate

Advertised bank rates often have wiggle room, especially right now when banks are fighting aggressively for market share. It’s worth asking: “Is that the best deal you can offer me?” Even better if you can back it up with numbers – check what other lenders are offering before your meeting. 

• Maintain higher repayments when you refix 

When you refix at a lower rate, keep paying what you were paying before at the higher rate. For example, if your repayments drop from $3,000 to $2,600 per month because rates fell, don’t pocket the $400. Keep paying $3,000 – the extra $400 goes straight to principal, reducing your balance faster and cutting years off your mortgage. 

• Shorter loan terms could mean a $100,000 difference

Most mortgages default to 25 or 30 years, but there’s no rule saying you can’t choose 18 years or 20 years. By shortening your term to 20 years instead of 30, you’ll save more than $100,000 in interest on an average mortgage. 

Should you switch banks for $15,000? 

Right now, banks are throwing cash at borrowers to get their business. Late last year, ANZ kicked off an aggressive cashback promotion offering 1.5% of lending to new home loan customers with at least 20% equity. ASB and BNZ quickly matched the offer. 

If you’ve got a $700,000 mortgage, that works out to $10,500 in your pocket – just for switching banks. $500,000 gets you $7,500. Even after paying $2,000 in legal fees to switch, you’re still up thousands. 

December 2025 data from CoreLogic/Cotality showed $5.8 billion in refinancing activity – more than double the previous high. Bank switches made up 41% of total lending movement, compared to the previous peak of 30% in June, likely driven by cashback offers. 

However, mind the small print. To keep the cashback, you must maintain your entire banking relationship with that bank for a minimum of three years. Not just your mortgage – your salary, your everyday banking, everything. If you refinance, sell, or break the banking conditions within three years, the bank can claw back the full cashback. 

Not everyone thinks cashbacks are good for borrowers overall 

David Cunningham, CEO of mortgage broking firm Squirrel, argues that cashbacks have become the new battleground instead of interest rates. He reckons if banks weren’t funding cashbacks, one-year fixed rates would’ve dropped to 4% by now instead of sitting in the mid-4s. 

Lower interest rates benefit everyone when they refix, even existing customers who can’t switch banks. Cashbacks only benefit people who can move, which creates a “pass the parcel” scenario where borrowers shuffle between banks while existing customers get left behind. 

But Claire Matthews, a banking expert at Massey University, isn’t convinced. She points out that cashbacks are only available to a subset of customers and are a standard marketing tool. Banks still compete on interest rates because that’s what drives most borrowers’ decisions. 

What about revolving credit? 

Revolving credit is a powerful tool in the right hands. It works like a giant overdraft – your salary gets deposited into the account, temporarily reducing your balance and the interest you pay. Mortgage repayments also reduce the outstanding capital. 

On a typical loan just over $300,000, you can save around $70,000 by using revolving credit — provided you’re organised and disciplined. If you’re someone who dips into available equity like it’s a bonus account, revolving credit will cost you more, not less. 

Where rates are right now — and where they’re headed 

As of February 2026, the Reserve Bank’s Official Cash Rate sits at 2.25% following cuts throughout 2024 and 2025. The average mortgage yield has fallen to 5.4%, and with close to 40% of fixed-rate mortgages refixing in the December and March quarters, the RBNZ expects the average yield to drop further to 4.7% by September 2026. 

Most bank economists expect the OCR to remain at 2.25% through most of 2026, with potential hikes beginning in mid-to-late 2026. BNZ, Kiwibank, and others have already signalled that the OCR has likely reached its low point for this cycle. 

That means if you’re refixing soon, this might be as good as rates get for the next few years. It’s worth having a conversation with your adviser about whether to lock in longer terms now or keep betting on further drops. 

Need help figuring out your next move? Give us a call on 0800 GOODWINS and let’s talk about what actually works for your situation.