For many homeowners across the country the time has come to refix your mortgage, and with inflation causing havoc for interest rates, many are now staring down the barrel of a sizeable increase to their repayments.

In its latest official cash rate announcement, the Reserve Bank left the OCR unchanged at 5.5% for the seventh successive time, saying that inflation is falling and should be back within the 1-3 percent target by the end of 2024. However, it also warned that rates may need to stay higher for a lot longer.

The rates offered by banks also sit a lot higher than the OCR as well. Vega CEO Harry Ferreira says that’s because they like to maintain what they call a “net interest margin”.

“This is what they need to achieve in order to operate and make sure that they keep stakeholders and shareholders happy.”

“With the OCR staying the same, the banks are going to keep it pretty steady too and that's going to force us to keep tightening our belts and making sure we’re being really prudent to get away from that sugar rush we had a few years ago.”

So with the numbers refusing to budge, what’s the best thing you can do to your mortgage and ultimately your wallet?

WHERE DO I START?

Ferreira says $107.8 billion dollars worth of mortgages are due to refix by July, and around $200 billion in total by December this year, and whether you’re dealing with a mortgage broker or a banker he believes the best place to start is by scanning the market and keeping on top of the OCR.

“You don't need to be an economist, you don't have to have a massive depth of understanding, but just reading up on, and knowing what’s happening with interest rates. The idea is to have a peripheral view of what’s going on across the banks.”

He says the next best thing is to engage a professional to find the best rate for you.

“Typically, Kiwi aren't that skilled at being able to negotiate rates with banks. They’ll often see the headline rate and sign up for that, which may not be the best one.”

“Engaging a professional or an advisor means they’ll be able to scan two or three banks for multiple options.”

Ferreira says It’s also really important to consider the structure of your loan.

“Interest rates are just one part, and I’ve seen this many times but I think using different structures of loan can save you tens of thousands of dollars.”

“That might mean a mix of floating and fixed rates. It may mean a mix of floating, fixed and offset accounts.”

“So if you’ve got $100,000 on a term deposit, some banks have offset accounts where they’ll use the interest that you generate on your term deposit. So you essentially pay no interest on your $100,000 of debt.”

Ferreira says structure can really accelerate the rate at which you pay things off, and in some cases shave five years off your mortgage.

It’s also really important to compare the different lenders.

“It's really hard for a punter to know what's happening across all the lenders. Find yourself someone really good to advise you, as they’ll have a very good understanding of what’s happening in the market.”

WHAT NOT TO DO

Ferreira says it’s key not to jump onto the first rate, even if it’s pitched to you as the best one.

“Many of the banks will flick you a rate online saying that this is a really good rate and that you should refix. People will often take that, but if they actually go and negotiate with the bank they’ll get 25 - 35 basis points better off.”

Don’t forget about cashback offers either.

“Make sure that you negotiate cashbacks, as some of the banks will do sizeable ones. I’ve heard of cashbacks in some cases up to $30,000.”

Ferreira says your bank may pay you to stay, but other banks will pay you to move.

“So if you make the leap your new bank may pay you 0.5% or 1% of the value of the debt up to $30,000, and that’s where brokers can really negotiate on your behalf.”

But while a cash injection may be a welcome motivator, there can be a couple of downsides to the sweetener.

“If you take that cashback then those banks can lock you in. They’ll say you can have the $30,000, but if you leave in the next five years, you have to pay it back. They can be lucrative, but they can also put you in handcuffs.”