Preparing for rising interest rates

With interest rates on the rise, it’s important to find out what this means for your home loan, and what steps you can take right now to ensure you remain one step ahead.

Five questions with ASB Chief Economist, Nick Tuffley

In early January 2023, Nick Tuffley (ASB Chief Economist) provided updated insights as to why interest rates are on the move and what to continue expecting in the near future.*

1. Why do interest rates rise and fall?

A key influence on market interest rates is what the Reserve Bank of New Zealand (RBNZ) does with the Official Cash Rate (OCR). The OCR is the interest rate set by the Reserve Bank that influences the price of borrowing money in New Zealand (including mortgage rates). This provides the RBNZ with a means of influencing the level of economic activity and inflation. The RBNZ adjusts the OCR to help it achieve its price stability (inflation) as well as employment objectives. The RBNZ has a 1-3% target range for inflation and would like it to be around 2% per annum on average. Similarly, it would like employment to be as close as possible to its maximum sustainable level.

2. What’s all this talk about inflation?

Inflation describes a rise in average prices through the economy (i.e. money is losing its value). New Zealand's Consumers Price Index (CPI) measures changes to the prices of consumer items that Kiwi households buy. Over the past 10 years the New Zealand CPI has generally been below the 2% mid-point of the RBNZ's 1-3% target range. That has changed quite rapidly over the past year. Annual CPI inflation has spiked and is running at a rate around 7% in 2022. CPI inflation is not expected to fall below 3% until 2025. Inflation is now too high from the RBNZ's perspective.

3. Why are mortgage rates on the rise now?

As a result of the stronger inflation outlook and limited spare capacity and strength of the local economy, the RBNZ delivered its first OCR increase in over seven years in October 2021. The RBNZ delivered further OCR increases at all its subsequent meetings in late 2021 and 2022. We are seeing similar developments happening offshore. These developments help to explain why there has been upward pressure on mortgage rates over the past year.

4. Where do you think mortgage rates are headed in the next 24 months?

Clear risks remain to the outlook, particularly with COVID-19 continuing to throw up ongoing challenges. However, if the New Zealand and major economies continue along the path we expect, mortgage interest rates are expected to keep lifting as the world gets past the worst of the pandemic, and central banks battle with inflation. The ASB Economic team expects the OCR will peak at 5.50%, and in addition to our assumptions about bank funding costs and inflation forecasts, we expect fixed-term mortgage interest rates will lift slightly higher than they are now over the next year. We expect most fixed rates to settle in a 6.5% - 7.5% range over the year ahead. However, as is often the case, the outlook is far from certain.

5. What's the best mortgage rate/term strategy?

We think it is prudent for borrowers carrying debt for longer than the next couple of years to budget on mortgage interest rates being higher than they are now. Lenders will likely do budget calculations for loan eligibility using interest rates that are noticeably higher than those currently being used to account for the risk that interest rates may go higher than actual loan rates today. It's always the case that mortgage rates could dip lower, due to anything from RBNZ actions through to renewed threats to the economic outlook.  But right now - even as NZ and many economies face several challenges - the risks still appear skewed to higher mortgage rates in the foreseeable future.  We suggest all borrowers pick a strategy that suits personal budgets (including a tolerance for changing interest rates) and need for flexibility, as well as the goal of minimising interest rate costs. Reading our ASB Home Loan Report is a good place to get more information to help you identify what is best for you.

What you can do to prepare

  • Home loan structure

    An easy place to start is getting your home loan structure right. You could potentially be paying less overall interest depending on the type of ASB home loan you choose. If you’re near the end of your current fixed term, or if you’re in the market to take out a home loan soon, make sure you check out the different ways you can structure your loan to ensure you remain one step ahead. Learn more below

  • Planning ahead

    Another easy place to start is using our handy mortgage repayment calculator. We recommend using this calculator so you can compare the amount you are paying now for each payment period versus what you may be paying if your interest rate goes up in the future. This will help you to forecast your outgoing payments, budget and plan ahead. Use our simple calculator below.

  • Budgeting

    Now more than ever your planning and budgeting skills are crucial for your financial wellbeing. As your rates start going up, we recommend looking at your budget and financial plans. Check out our simple budgeting tips and tools to find easy ways to help adjust your spending and saving, which in turn could help you reduce interest costs going forward.

The right home loan for you

We offer three main types of loans at ASB: Fixed, Variable or Revolving credit. When reviewing your existing lending you need to consider more than just the interest rate! It’s crucial to lock in a home loan that works for your individual situation and is important to remember that the way you structure your home loan can potentially help you financially in the future.

Handy hint: If you currently have an ASB fixed term loan rate that is nearing time to re-fix (or you would like to re-fix your existing ASB home loan rate), we recommend assessing whether a long or short-term fixed rate loan will be more financially beneficial for you. Depending on whether you're in your forever home or if you are in a shorter-term property with future home ownership goals, we have different fixed interest rate terms to suit you.

An ASB home loan gives you plenty of options to pay off your home loan faster and to ensure it continues to work for you. Check out the links below to learn more about each of our home loan types.

Fixed interest rate home loan

Make budgeting easier with regular, fixed payments.

Find out more

Variable interest rate home loan

Enjoy flexibility with your loan payments.

Find out more

Revolving credit home loan

Draw and repay your loan at any time, within your credit limit.

Find out more

Mortgage Repayment Calculator

Budgeting tips and tools

Budgeting helps you stay on track with your financial goals and stay in control of your money. There's no ‘right’ way to budget, so it’s all about finding the best way to budget for you and your family.

If you think your rates are going to go up, use our budgeting template to help you get started, or check out our budgeting page with hacks, guides and management tips to show how we can help you achieve your financial goals. You can also use Spend Tracker, in the ASB Mobile Banking app, to see trends with your money in and money out each month. It automatically categorises your spending for you too, helping your compare this with your budgeted allowance.

There are also many New Zealand experts who can help work out a budget that works for you. MoneyTalks provide free, confidential budgeting advice and can connect you with financial mentoring and other community services.

Here are some quick tips to help you get started (for more detail click here):

    Review essential spending

    Cut back on non-essentials

    Separate your accounts

    Take control of your debt

    Get your bills sorted

    Pay your savings accounts like you pay your bills

    Regularly check your balance

    Stay informed with alerts

How can ASB Home Central help you

ASB Home Central is a tool within FastNet Classic internet banking that allows you to visualize your home loan, manage your repayments, and explore your home loan possibilities.

This tool will enable you to:

  • See your home’s estimated property value, and your home loan amount (multiple if applicable).

  • Find the repayment amount that suits your lifestyle, and visually show you the impact of extra payments or different rates.

  • Confirm your repayment amounts through tracking your repayment progress and estimated debt-free dates, making lump sum payments, and more.

Sign up to our home loan rate report

This report details our fixed and floating mortgage rate outlook. Aimed at helping you identify the most appropriate strategy when choosing loan terms.

Home loan interest rates

Min 20% equity

12-month fixed rate
18-month fixed rate

24-month fixed rate

36-month fixed rate
48-month fixed rate

60-month fixed rate
6-month fixed rate
18-month fixed rate

24-month fixed rate
36-month fixed rate
48-month fixed rate
60-month fixed rate
6-month fixed rate
12-month fixed rate
Housing variable rate

Rates may change. Loan processing fee of up to $400 may apply. After the fixed rate period the Housing Variable Rate will apply. For those with less than 20% equity see here for rates.

We're here to help

If you have any questions or are keen to talk to someone about your home loan, please get in touch. We’re here to help.

Apply online

Start your home loan application online. We'll be in touch to complete the next steps with you.

Get started

Give yourself 5-10 minutes.

Meet in person

One of our team can meet at a time and place that suits you, or you can make an appointment to meet at an ASB branch.

Find a Home Ownership Manager near you.

Log in to book an appointment.

Give us a call

You can pick up the phone and call one of our home lending team, weekdays 8am-6pm and on Saturday 8:30am-5pm.

0800 100 600

+64 9 306 3000 for overseas

Manage loan online

Existing customers can view and manage loans, apply for a top up and more.

Log in to Home Central

ASB’s lending criteria, terms, conditions and fees apply.


This content is published solely for informational purposes. It has been prepared without taking account of your objectives, financial situation, or needs. Before acting on the information on this webpage, you should consider the appropriateness and suitability of the information, having regard to your objectives, financial situation and needs, and, if necessary seek appropriate professional or financial advice.

We believe that the information on this webpage is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made on this webpage. Any opinions, conclusions or recommendations set forth on this webpage are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed elsewhere by ASB Bank Limited. We are under no obligation to, and do not, update or keep current the information contained on this webpage. Neither ASB nor any person involved in the preparation of this content accepts any liability for any loss or damage arising out of the use of all or any part of this webpage.

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Home loans How to Prepare for Rising Interest Rates | ASB