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"Lower mortgage rates will help, and low-deposit lending allowances at banks. First-home buyers will see opportunities - there are plenty of listings out there." Kelvin Davidson, Chief Economist CoreLogic New Zealand

Housing market set for rebound, CoreLogic says In much of the country, there's evidence that the bottom of the market has been reached. "The question is what happens next."

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The Cost of Refinancing and Clawbacks: Borrower Beware

WHAT THE BANK CAN CHARGE YOU

Break Costs

Breaking a fixed rate may incur an Early Repayment Recovery (ERR) also known as a break or prepayment fee. This is the actual cost to the bank / lender passed on as an additional cost when you have fixed a loan for a period of time and want to break it early.

It will be calculated based on the cost to the bank of borrowing the money on the day you signed the contract, compared with the cost of borrowing money today. In New Zealand, banks are not allowed to profit from cancelling your loan contract, so this is a true cost to the bank.

Administration Fees

The bank, however, is allowed to charge an administration fee, and this can range from $50 to $200. For clarity, your quote will separate out the administration fee and break cost.

Discharge Fees

If you’re refinancing, the bank will charge you a discharge fee to release the mortgage over your property.

WHAT YOUR LAWYER CAN CHARGE YOU

Moving your mortgage to another bank is called 'refinancing'. It is a relatively simple process but does need to involve a lawyer who is required to change the interested party (your bank) on your property's title. Only a lawyer can do this and so you must use a lawyer when refinancing your mortgage.

Don't be afraid to shop around and ask what they charge as costs can vary widely.

WHAT YOUR ADVISER CAN CHARGE YOU

If you repay your loan early, the lender may recover from your Financial Adviser some or all of the commission they received from the lender when you settled your loan. This is commonly referred to as a “clawback”.

In such cases, the Financial Adviser may pass on that cost to you if you repay or refinance your mortgage usually within the first 27 months of the loan being advanced.

Any such recovery fee should be clearly outlined in the Financial Adviser's Disclosure Statement. You consent to liability for this recovery cost when you sign the Declaration & Authorisation form, authorising your Financial Adviser to organise lending for you.

If you are charged a clawback recovery fee, it will be charged at the lower of the actual commission clawback amount or up to a maximum specified amount.

Examples of when you may charged a clawback recovery fee include:

- The property is refinanced within the clawback period and your Financial Adviser was not given the opportunity to arrange the refinance
- The property is sold and/or the loan repaid within the clawback period
- You make a lump sum payment on your mortgage.

HOW CAN I AVOID UNNECESSARY COSTS?

In the first instance, reach out to your Financial Adviser. They can help you clarify what those costs might be, and talk you through options available to you so neither you nor the Adviser are left out of pocket, and you don't risk leaving your relationship in tatters.

If for whatever reason you don't want to contact your Financial Adviser, review the Financial Adviser's Disclosure Statement they will have provided to you when you first engaged them. If you can't find the Disclosure Statement, they will have it available on their website.

Remember - anything to do with commission paid to the Financial Adviser is a confined to the broker-client relationship, so the bank won't be able to tell you if you're liable for any other costs other than what the bank charges.

Further reading:
1. https://fscl.org.nz/case-studies/do-i-really-need-to-pay-this-clawback-fee/
2. https://www.mpamag.com/nz/news/general/banks-claw-back-lump-sum-mortgage-payments/469838
3. https://evolutionlawyers.nz/resources/property-conveyancing/refinancing-a-residential-property/

Ever wondered why floating mortgage interest rates are so much higher than fixed? Great article here

Why are floating mortgage interest rates so high? David Cunningham examines the disparity between fixed and floating mortgage rates in New Zealand

“There are three kinds of lies: Lies, Damned Lies, and Statistics”. Alternative headline: 92.6% of properties selling for a profit.

More than one in 10 residential properties sold in Auckland being sold at a loss Number of residential properties selling at a loss at its highest point since 2015, CoreLogic figures show

"Despite stretched affordability, high interest rates, and cost of living pressures, first home buyers (FHBs) in New Zealand continue to lead the market in purchasing activity, highlighting the continued strong appeal of having a 'foot on the ladder'"

First home buyers hit record high 27% market share Despite stretched affordability, high interest rates, and cost of living pressures, first home buyers (FHBs) in New Zealand continue to lead the market in purchasing activity, highlighting the continued strong appeal of having a 'foot on the ladder'.