The Tailored feature on a home loan would use the formula in your letter of advice to automatically increase your repayments on the anniversary of your home loan if certain circumstances were met.
You could accept or decline these potential increases (assuming you were still meeting the minimum repayment requirements) and potentially pay your home loan off faster.
Why is BNZ removing the Tailored feature from home loans?
We’re planning to remove the Tailored feature from all BNZ home loans, to support our drive to simplify our home loans and products. There are other options available to customers which provide greater flexibility.
For instance, with the Tailored feature, you couldn’t make lump sum payments, refix your interest rates, or change your repayments online.
By removing this feature, most customers will now be able to do all this.
What is the difference between a home loan with or without the Tailored feature?
With the Tailored feature, you receive a ‘Tailored Repayment’ letter around 60 days before the anniversary date of your home loan. This letter lets you know the details of your loan for the next 12 months, along with any proposed changes to your repayment amount, based on your Repayment Index Base (RIB), which you can read more about below.
If there was an optional increase (i.e. not an increase to meet the minimum payment amount required to repay your loan by the end of its term, you had the option to opt out of it. Any automatic increase in the minimum payment was not treated as an early repayment, meaning there were no early repayment charges.
Having the Tailored feature means your repayment amount normally only changes on the anniversary date of your loan, even where changes have already been made to your loan throughout the year. For example, an interest rate change, a lump sum payment, etc.
Home loans without the Tailored feature have their repayment amounts and repayment schedule (see below) adjusted whenever a change to the home loan is made.
Once the Tailored feature is removed, you will no longer receive the ‘Tailored Repayment’ letter 60 days before your anniversary.
I’ve recently received an anniversary letter. What do I need to do?
If your next Tailored home loan anniversary date is before 30 April 2025, you will have recently received or will shortly receive, your usual Tailored anniversary letter (this has the heading ‘An update to your Tailored repayments’).
Anniversary letter changes stated to happen before 30 April 2025 will still take effect. However, when the Tailored feature is removed on 30 April 2025, we’ll write to you again to confirm the removal of Tailored, and your repayment amount(s) may change again at that time and differ from the initial estimate provided on 17 February 2025.
You will also be able to see your confirmed minimum payment amount(s) for payments to be made after 30 April in Internet Banking or the BNZ app from 30 April 2025.
How does the RIB rate work?
Your Repayment Index Base (RIB) was first set out in your letter of advice when your home loan with the Tailored feature began, although you may have opted for changes to your RIB since then.
If your RIB is set lower than your interest rate on your home loan on an anniversary date, your repayments will increase by following the formula in clause 14.13 of your Home Loan Facility Master Agreement (agreement). Your new minimum payment amount will be high enough to pay the loan off by the end of its term.
If your RIB is set higher than your interest rate, there would be no change to your repayments, as long as the minimum repayment is already high enough to pay the loan off by the end of its term.
You can read more about the formula in clause 14.13 of your current agreement.
What is a repayment schedule?
It’s a schedule of payments required to ensure a loan is paid off within its term. This is based on assumptions such as the loan’s current interest rate, remaining term, and repayment frequency.
Can I still increase my repayments each year?
Yes, removing the Tailored feature, will not prevent you from increasing your repayments and potentially paying your loan off faster.
While an increase will no longer happen automatically on the anniversary of your home loan when the Tailored feature is removed, you’ll be able to make adjustments to your loan – like increasing your repayments – by either contacting us, or by using Internet Banking or the BNZ app.
Keep in mind, early repayment charges may be applicable if you’re on a fixed-rate home loan. Standard home loans have the benefit of the 5% threshold without having to pay an early repayment charge. You can find out more on this below.
Home loans on a variable rate do not have early repayment charges.
You can find out more about what you can do to your home loan at bnz.co.nz/homeloansupport.
Once the Tailored feature is removed, you may also be able to use the MyProperty tool if you have access to Internet Banking. It can show you how changes to your repayments could potentially affect your home loan(s) and when you could be mortgage-free. Visit bnz.co.nz/myproperty for more information.
If you don’t have access to Internet Banking, please call us on 0800 275 269 or talk to your BNZ banker, and we will work to find a solution.
Will I now pay an early repayment charge (ERC) when I increase my repayments?
This depends on the type of home loan you have.
If your home loan is on a variable rate, ERCs do not apply, and you can pay more than the minimum required amount as you wish.
If you’re on a fixed-rate home loan, ERCs may apply if you increase your repayments. However, if you have a fixed-rate Standard home loan, you have access to the 5% threshold. There’s more on this below in the next question.
If you have a Classic home loan with a fixed rate, you do not have access to the 5% threshold and may be charged an ERC. You can no longer take out a Classic home loan. Any remaining Classic home loans with BNZ will be moved to Standard home loans in 2025. If you have a Classic home loan and wish to move to Standard earlier to gain access to the 5% threshold, please call us on 0800 275 269 or talk to your BNZ banker for more information.
You may choose a higher repayment amount when you’re re-fixing your loan, and that higher repayment amount will take effect on the same day your new fixed rate takes effect. Where the higher repayment amount takes effect on the same day as the new fixed rate begins, there is no ERC charge, and this doesn’t count towards the 5% threshold.
How does the 5% threshold on Standard home loans work?
We will not charge you an early repayment charge if the effect of all early repayments you make in any consecutive 12-month period within a fixed rate period is less than or equal to the ‘5% threshold’. We calculate the 5% threshold as 5% of the outstanding principal amount at the start of the fixed rate period. The first 12-month period starts on the first day of the fixed rate period.
In addition, the early repayment charge is only payable to the extent that the effect of the early repayments is more than the 5% threshold.
As a simplified example, for a 1-year fixed rate Standard home loan with a balance of $400,000 at the beginning of the fixed rate period, the 5% threshold would be $20,000. An increase in repayments of $1,000 a month would be $12,000 in that consecutive 12-month period. Since $12,000 is under the $20,000 threshold, there wouldn’t be any early repayment charges for this particular 1-year fixed rate period.
However, an increase of $2,000 a month would be $24,000. This is over the 5% threshold of $20,000, so an early repayment charge would apply on the amount above the 5% threshold.
If you choose to end your agreement or repay or refinance your home loan during a fixed rate period, you may have to pay an early repayment charge. If you do this while you’re still on a Classic home loan you won’t receive the benefit of the 5% threshold.
If you’re registered for Internet Banking or the BNZ app, you can see whether an early repayment charge (which takes the 5% threshold into account, if applicable) may apply by clicking your home loan account and selecting either ‘change your regular repayments’ or ‘make a lump sum payment’.
Why will my payments potentially increase from 30 April 2025?
The letter you’ve received sets out what we estimate your minimum payment will be from 30 April 2025. As highlighted in the letter, this is subject to change.
An example of why your payment will change from what you currently pay is that your minimum payment would have increased on the next anniversary of your home loan anyway.
Your minimum payment may also change, as without the Tailored feature, your principal and interest payments will be calculated differently. There will no longer be the assumption that you’ll agree to automatic annual increases to your home loan repayments every year. If your minimum payment does change, it’s to make sure your loan is paid off by the end of its term.
Who can I talk to if I have concerns about my payments increasing?
If you have any questions about your estimated minimum payment amount, please call us on 0800 275 269 or talk to your BNZ banker.
For any concerns, please call us as soon as you can, so we can work with you to find a solution quickly.
You can also get free independent budgeting advice from organisations, such as MoneyTalks, by visiting moneytalks.co.nz or calling them on 0800 345 123. Consumer advice is available from Citizens Advice Bureau on 0800 367 222, and legal advice from the Community Law office - visit communitylaw.org.nz for more information. All these services are confidential.
What will happen on 30 April 2025 when the planned changes go ahead?
On 30 April 2025, we’re planning to remove the Tailored feature from your home loan.
We will send you another letter, informing you of the changes to your home loan. If you have more than one home loan with the Tailored feature, you’ll receive one letter for each loan.
We’ll also include a new home loan summary with each letter, which sets out the updated payment details for your home loan.
Will my ability to offset my TotalMoney home loan change because of the Tailored feature?
No, the removal of the Tailored feature won’t affect your ability to offset your TotalMoney home loan.
Will my Rapid Repay or Mortgage One home loans be impacted by this change?
No, Rapid Repay and Mortgage One home loans do not have the Tailored feature.
How likely is it my payment amount will be different from the estimate?
We have estimated your new minimum payment amount from 30 April 2025.
If no changes are made to your home loan between 31 January 2025 and 30 April 2025, the estimate in your 17 February 2025 letter should be similar to your new minimum payment from 30 April.
If you do make changes to your home loan, your repayment amount is more likely to be different from the estimate provided.
If you’re rolling off a fixed rate before 30 April 2025, and that fixed rate is lower than BNZ’s current market rates, we’ve based your estimated minimum payment on our Standard 1-year fixed rate of 5.55% as of 31 January 2025, to give you a more accurate estimate. If you move to a variable rate or refix at a different interest rate than the one above, your minimum payment is more likely to be different to the one provided in the estimate.
As stated in the letter, all estimates are subject to change. If you have any questions, please call us on 0800 275 269 or talk to your BNZ banker.
What is ‘redraw’?
Since you have a loan on the December 2023 version of our Facility Master Agreement (FMA), in clauses 14.11 and 14.12, you were able to apply to ‘redraw’ on that loan.
This means, if you had a term home loan and were paying it down faster than you needed to, you could have applied to re-borrow some of these funds.
In your new June 2024 FMA, we’ve removed references to ‘redraw’ and updated the clause numbering to reflect this change. This means you’ll no longer be able to apply to redraw an amount under a loan.
There are still other ways to access equity in your home. You can talk to us about your financial goals, and we’ll help find the best option for you. All home loans are subject to our lending criteria (including minimum equity requirements).