Changes to the way we calculate interest on Classic/Standard home loans with monthly repayments

Starting from 5 May 2024

This information is for existing customers on Classic or Standard home loans with monthly repayments. If you receive a letter from us, there’s nothing you need to do – but here’s some more information about the change.

What is changing

From the date shown in your letter, interest will be calculated based on the actual number of days in each repayment period. If the repayment period is a full month, that will be between 28 and 31 days, depending on the number of days in the month. This is called ‘daily interest charges’.

Previously we smoothed, or evenly divided, the interest across 12 months. That means you paid interest for the same number of days each month, regardless of the actual number of days in that month. To calculate that, we multiplied your daily interest charges by the average number of days in a month (30.4167 days). This is called ‘periodic interest charges’.

If you make ‘principal and interest’ monthly repayments

You’ll continue to pay the same repayment amount, at the same interest rate, on the same dates, as you did before this change was made. However, you may have an extra repayment and/or a different final repayment to make at the end of your loan term. If your number of repayments has changed, your expected end date will also have changed.

Because ‘daily interest charges’ and ‘periodic interest charges’ can affect your loan differently, you may pay more interest over the course of your loan. The difference in interest can be worked out by looking at the ‘before the change’ and ‘after the change’ information in your letter. You can compare the number of remaining repayments, as well as the difference in the final repayment.

If you make ‘interest only’ monthly repayments

Your interest rate will stay the same, but your regular ‘interest only’ repayments will change, depending on the number of days in each repayment period. So, for example, your repayment amount will be higher for repayment periods with 31 days, but lower for repayment periods with 30 days or fewer. You’ll still make these repayments on the same dates as you did before this change.

It’s important to know that repayments amounts are based on the number of days in the previous repayment period. For example, if your repayment is due on 20 April, the previous repayment period would typically be between 20 March and 19 April, which is 31 days.

Projected number of remaining repayments and final repayment

The information in your letter, and the accompanying home loan summary, assumes that all your details stay the same for the remainder of your loan. In reality, these details are likely to change. For example, if you change your repayment amount, make a lump sum payment, or refix the interest rate for a fixed rate period.

Other home loans

If you’ve got a Classic or Standard home loan on weekly or fortnightly repayments that started before 5 May 2024, we will have contacted you separately. Learn more

TotalMoney, Rapid Repay, and Mortgage One home loans have always used ‘daily interest charges’ so those won’t change.

Why we’re making this change

We’re making this change to ensure our technology continues to evolve to meet the needs of our customers.

If you’ve got questions about this change, or about other changes to our products, contact us on 0800 275 269. If you’re a business customer, you can contact us on 0800 269 763 or talk to your BNZ banker.