Your mortgage rate is 8%
Repeat after me:
“The interest rate I pay on my mortgage is 8%...”
Even if it’s not true, this mindset could be the smartest financial strategy you adopt this year.
Right now, your mortgage rate is likely sitting somewhere between 5% and 6%, depending on when you last fixed. It feels manageable. But mortgage interest rates in New Zealand are cyclical—what feels low today could creep up again over the coming years. That’s why preparing now can protect you later.
Let’s walk through a simple example. A couple has a $400,000 mortgage fixed at 4.2%. Their repayments are around $470 per week, and that fits nicely into their current lifestyle. But what happens if, in a few years, their interest rate climbs to 8%? Suddenly, their repayments jump to around $691 per week. That’s a $221 difference—every week.
If they start paying that higher amount now, even while locked into their lower rate, they achieve two major wins. First, when interest rates eventually do rise, they’ve already adjusted their budget. There’s no nasty payment shock—they’re already used to paying more. Second, and perhaps more importantly, they pay off their mortgage significantly faster. In this example, increasing repayments by $221 per week cuts the loan term from 30 years to just under 16 years—and saves approximately $158,000 in interest over the life of the loan.
The idea here isn’t to panic. It’s to be proactive.
So, How Do You “Raise” Your Interest Rate?
You don’t need to jump straight from your current repayment level to 8% overnight. This can be a gradual, sustainable process. Here’s how to ease into it:
Step 1: Start by working out what your mortgage repayments would be at 8%. You can use an online mortgage calculator to get a weekly or monthly figure. That number becomes your long-term goal.
Step 2: Increase your repayments incrementally. Each time you get a pay rise, finish paying off a car loan, or cut out a regular expense—like switching from premium cable TV to a cheaper streaming service—redirect that money to your mortgage. A $40 per week saving here, a $25 increase in income there—it all adds up. These are opportunities to boost your mortgage repayment without really feeling it.
You’d be surprised how often small financial wins are simply absorbed into lifestyle spending. That $10 coffee subscription or spontaneous online order might be better used knocking years off your mortgage.
Step 3: Make sure your mortgage structure allows you to make extra repayments without penalty. This could involve using a revolving credit account or having a portion of your loan on a floating rate. Just be careful not to attach an EFTPOS card to this account—having easy access to those extra payments can tempt you to dip into them. The goal is to get ahead, not to spend it.
Why This Matters More Than Ever
Interest rates don’t stay still. We’ve come through an unusually low-interest-rate environment, and many homeowners have never had to deal with the 8–9% rates that were once considered normal. That may not be tomorrow’s reality—but preparing now means you won’t be caught off guard.
This strategy isn’t about fear—it’s about control. You decide how aggressively you want to get ahead. Even small overpayments today can make a massive difference down the track.
So, while your current rate might be lower, start building your financial plan as if your mortgage rate is 8%. Treat it like a rehearsal for the future—and enjoy the benefit of faster repayments, lower interest costs, and financial peace of mind.