The Impact of Interest Rate Changes on Your Mortgage

If you’re planning to buy a home in Hamilton or anywhere in the Waikato region, one of the first questions you’ll ask is: How much can I borrow for a mortgage? It’s a big decision, and the answer depends on a few key things — your income, your expenses, your deposit, and even your credit score.

What Affects How Much You Can Borrow for a Mortgage?

Income, Expenses, and Credit Score

Your income is the starting point. Lenders want to know how much you earn — and how stable that income is. If you’re employed full-time, that’s fairly straightforward. If you’re self-employed or your income varies, they’ll look more closely at your financial history to understand your earning patterns.

But income is only part of the picture. Your existing debts also play a big role. Credit cards, car loans, and other personal loans can all affect how much you’re able to borrow. Lenders consider your total financial commitments to make sure you can comfortably manage a mortgage on top of them. Keeping your debt under control shows you can handle repayments responsibly, which strengthens your application.

Deposit Size and LVR (Loan-to-Value Ratio)

Your deposit is the amount of money you put toward the purchase upfront. In New Zealand, most lenders prefer a deposit of at least 20%. But there are options for lower deposits — especially for first-home buyers. You may be able to get a loan with a deposit from as little as 5%.

How Do Banks and Brokers Assess How Much You Can Borrow for a Mortgage?

Bank Assessments

When you apply directly with a bank, they’ll use their own calculator to work out how much you could borrow. They look at:

Income – not just how much you earn, but how stable it is (salary, self-employed income, or contract work).
Expenses – your everyday living costs such as food, transport, insurance, and utilities.
Debts – things like credit cards, car loans, personal loans, Afterpay, or store finance. Even small limits on unused credit cards are counted.
Deposit – how much you’ve saved or built up through KiwiSaver or other sources.

On top of that, banks apply a test (or “stress”) interest rate, which is higher than the current rate. This is to check whether you could still afford repayments if interest rates rise in the future.

Broker Assessments

Mortgage brokers, like Andre Stokes here in Hamilton, take a wider view. Instead of relying on just one bank’s criteria, brokers work with multiple lenders — each with their own calculators and lending rules. This means:

You’ll often have a better chance of approval if one bank says “no.”
You can compare borrowing amounts across lenders.
You’re more likely to find a solution that fits your income, debt, and goals.

Brokers also help you present your application in the best light — especially if you’re self-employed, have variable income, or already have existing debts.

Borrow for a Mortgage in Waikato: What’s Typical?

Waikato Property Prices

Property values across the Waikato Region can vary considerably, depending on the location:

Hamilton City: The average house price as of June 2025 is approximately NZ$788,171, according to CoreLogic data compiled by Opes Partners.
Waikato Region Overall: Median prices hover around NZ$735,000 as of June 2025, having surged from about NZ$340,000 a decade earlier.
Te Kūiti (Waitomo District): This remains one of the most affordable areas in the region. The average house value stands at NZ$392,550,

This underscores a substantial price range—from Te Kūiti’s mid-$300k to Hamilton’s upper-$700k—highlighting how location plays a pivotal role in affordability for buyers.

First-Home Buyers in Waikato

If you’re taking your first steps onto the property ladder, you may have access to several helpful schemes:

1. KiwiSaver First-Home Withdrawal

After contributing to KiwiSaver (or a complying super fund) for at least three years, you may be able to withdraw most of your savings—including member contributions, employer contributions, government contributions, and investment earnings—to help with your first home purchase.

You must leave a minimum of NZ$1,000 in your KiwiSaver account, and not all funds are withdrawable (e.g., Australian super transfers and certain government kick-start amounts may be excluded).

Withdrawals are restricted to a property you intend to live in—this cannot be used to purchase investment properties.
Check out the IRD website for more information

2. Kāinga Ora First-Home Loan

With this option, you can secure a home loan with a deposit as low as 5%, thanks to Kāinga Ora underwriting the remainder of the deposit risk for participating lenders.
Kāinga Ora – Homes and Communities

Eligibility criteria include being a first-home buyer (or a previous owner in a similar financial place as a first-home buyer), meeting maximum income thresholds (e.g., <$95,000 for individuals without dependants or <$150,000 combined for co-buyers), and purchasing a home you intend to live in.

The loan includes a 1.2% Lender’s Mortgage Insurance (LMI) premium, payable upfront or added to the loan balance.

Tips to Increase How Much You Can Borrow for a Mortgage

Reduce Your Debt
Banks look closely at your existing debt, such as credit cards, personal loans, and car finance. Paying these down (or closing unused credit facilities) lowers your monthly commitments, which can free up more borrowing power.
Increase Your Deposit
The bigger your deposit, the less risk the lender takes on. This can not only increase how much you’re able to borrow but may also give you access to better interest rates and more lenders.
Improve Your Credit Score
Your credit history shows lenders how reliable you are with money. Paying bills on time, avoiding missed payments, and keeping debt levels manageable can strengthen your application and make banks more willing to lend.
Use a Broker
Mortgage brokers have access to a wide range of lenders and know the different borrowing criteria. They can help present your situation in the best possible way and find a lender who’s more likely to offer you the maximum amount.

Contact Andre for a Personalised Borrowing Assessment

Every buyer is different. Your income, deposit, and goals all affect how much you can borrow for a mortgage. Andre Stokes is a local mortgage broker based in Hamilton. He knows the Waikato market and works with a range of lenders.

Ready to find out how much you can borrow? Contact Andre today for a free, personalised borrowing assessment.

When it comes to managing a mortgage, interest rates play a huge role. If you’re a homeowner or planning to buy a home, understanding how interest rates work can save you a lot of money in the long run. In New Zealand, interest rates are set by the Reserve Bank of New Zealand (RBNZ), and any change in these rates can affect how much you pay on your mortgage.

How Interest Rates Work

Interest rates determine how much you pay to borrow money. If you have a mortgage, part of your payment goes toward the loan itself (the principal), and part goes toward interest. When the interest rate goes up, the amount you pay in interest increases, which means your monthly payments could go up. When rates go down, your payments could decrease.

In New Zealand, the Reserve Bank sets the Official Cash Rate (OCR), which influences interest rates across the country. When the OCR rises or falls, it affects the interest rates that banks charge for mortgages.

Recent Interest Rate Changes by the Reserve Bank of New Zealand

Over the past few years, the RBNZ has adjusted interest rates to respond to economic conditions. Recently, New Zealand has seen both rate hikes and cuts, depending on factors such as inflation, employment, and the global economy.

When inflation is high, the Reserve Bank may raise interest rates to slow down spending and bring inflation under control. On the other hand, if the economy is struggling, the RBNZ may cut rates to encourage borrowing and spending. These changes impact mortgage holders, especially those with floating-rate loans or fixed-rate loans nearing the end of their term.

In 2024, the Reserve Bank has implemented several rate changes. For many homeowners, these adjustments have affected their mortgage repayments significantly.

How Do Interest Rate Changes Affect Your Mortgage?

When the Reserve Bank raises interest rates, it increases the cost of borrowing money. If you have a mortgage, this means your repayments may increase, especially if you have a floating-rate mortgage or if your fixed-rate mortgage is coming up for renewal.

- Floating-rate mortgages: If you’re on a floating rate, your interest rate will move up and down with market rates. When the Reserve Bank raises rates, your lender will likely pass on that increase. This means higher monthly payments for you.

- Fixed-rate mortgages: If you’re on a fixed-rate mortgage, your payments won’t change until your fixed term ends. However, when you go to refix your mortgage, you may face higher interest rates, which could mean higher repayments.

For example, if you’re paying 3.5% interest on a $500,000 mortgage over 25 years, your monthly payment would be around $2,500. But if your interest rate rises to 5%, your payments could jump to about $2,920. That’s an increase of over $400 a month, which can significantly impact your budget.

Should You Refix or Stick with a Floating Rate?

With fluctuating interest rates, many homeowners wonder whether they should lock in a fixed rate or stay with a floating one. Both options have pros and cons, and the right choice depends on your financial situation and tolerance for risk.

- Fixed-rate mortgages: Locking in a fixed rate gives you certainty. Your repayments won’t change during the fixed term, even if interest rates rise. This can be helpful if you’re on a tight budget and want to know exactly what you’ll be paying each month. However, if interest rates drop, you won’t benefit from lower repayments until your fixed term ends.

- Floating-rate mortgages: With a floating rate, your payments can go up or down depending on market conditions. If you think interest rates will fall, a floating rate might save you money in the short term. However, if rates rise, you could face higher repayments.

Many homeowners choose to split their mortgage between fixed and floating rates. This strategy gives you the security of a fixed rate on part of your mortgage, while also allowing you to take advantage of lower rates on the floating portion.

Planning Ahead: What You Can Do

Interest rate changes can be stressful, but there are ways to prepare and minimise their impact on your mortgage.

Review your budget: If interest rates rise, you’ll need to make sure your budget can handle higher mortgage repayments. Cutting unnecessary expenses or increasing your income can help you stay on track.

Refinance or refix your mortgage: If you’re worried about rising rates, consider locking in a fixed rate now. Talk to your lender or mortgage advisor to see if refinancing could save you money.

Make extra repayments: If your budget allows, try making extra repayments on your mortgage. This can reduce the amount of interest you’ll pay over the life of your loan and give you more breathing room if rates rise.

Keep an eye on the market: Stay informed about interest rate trends and predictions from the RBNZ. This will help you make better decisions about your mortgage.

Get professional advice: If you’re unsure about what to do, consult a mortgage advisor. They can offer personalised advice based on your situation and help you navigate interest rate changes.

The Long-Term Impact of Interest Rates on Homeownership

Over the life of your mortgage, interest rates will likely rise and fall multiple times. These changes can add up over time, affecting how much you pay overall for your home. Keeping an eye on interest rates and adjusting your mortgage strategy can save you thousands of dollars in the long run.

For example, if you’re able to lock in a low rate when interest rates are down, you could save significantly on interest payments over several years. On the flip side, if you don’t plan ahead and rates rise, you could end up paying much more than you anticipated.

Conclusion

Interest rate changes have a direct impact on your mortgage repayments. Whether you’re on a floating rate or a fixed-rate mortgage, it’s important to stay informed and prepared for any changes. By reviewing your budget, refinancing when necessary, and seeking professional advice, you can minimise the impact of rising interest rates and keep your mortgage under control.

If you have any questions about how interest rate changes might affect your mortgage, don’t hesitate to reach out to Andre, your mortgage advisor. He can help you explore your options and make the best decision for your financial situation.