Free Mortgage Break Fee Calculator for New Zealanders
Estimate the cost of breaking a fixed-rate mortgage early. Banks charge a fee to compensate for the interest they would otherwise have earned. The actual fee depends on each bank’s wholesale curve, but the simple-maths estimate sits within 10% of the real number.
Your fixed loan
Based on a $500,000 balance fixed at 7.20%, with 2.0 years left and a current wholesale rate of 5.20%.
About our Mortgage Break Fee Calculator
A break feeBreak feeCharge for exiting a fixed-rate mortgage early; depends on rate movement and time remaining.View in glossary → compensates the bank for income it would have earned if you had kept the loan to the end of its fixed term. The size depends on one variable. How much wholesale rates have moved since you fixed.
If wholesale rates have fallen below your fixed rate, the bank can only re-lend at the lower rate, and recovers the gap from you. If wholesale rates have risen above your fixed rate, the bank can re-lend at a profit and the break fee usually drops to zero.
The calculator runs the simple-maths estimate. Multiply your loan balance by the rate gap, then by the years remaining on the fixed term. The actual figure your bank will quote is usually within 5-10% of this, after their internal present-value discount.
Move the wholesale-rate slider to see how a 50-basis-point change in the market rate moves the fee. Move the years-remaining slider to see how the fee shrinks as you approach the end of the fixed term.
How to use it
Enter your current loan balance, the rate you originally fixed at, the years remaining on the fix, and an estimate of the current wholesale rate for the matching term. Use the Reserve Bank’s wholesale-rate page or interest.co.nz for a current figure.
The result panel returns the rate gap, the annual interest cost the bank stands to lose, the simple-maths break fee, and the equivalent monthly figure to recover from a lower contract rate.
For a more precise quote, ask your bank for a written break-fee statement. The number they give you is binding for a short window (often a few business days) and is what you can hand to a competing lender or use in a refinance decision.
Why use it
The two most common reasons to break a fixed-rate loan are switching banks for a lower rate and clearing the loan with a lump sum that exceeds the allowed annual extra. Both are decisions where running the numbers ahead of asking the bank can save weeks of false starts.
For a switching decision, the simple-maths break fee is the cost. The savings come from the lower rate over the remaining fixed term. If the savings are smaller than the fee, breaking and switching never pays back; if they are larger, the difference is what you keep.
For a lump-sum decision, the calculator estimates the cost of repaying a fixed-rate loan early. Some borrowers choose to wait until the end of the fixed term to clear the loan rather than pay the break fee; others choose to break and clear if the lump sum is large enough that the saved interest more than covers the fee.
The maths behind it
Break fee ≈ Balance × (Original rate − Current wholesale rate) × Years remaining The fee is the present value of the bank’s lost interest, calculated against the wholesale (swap) rate the bank can re-lend at today. If the wholesale rate today is below your fixed rate, the bank faces a shortfall and recovers it from you. If wholesale rates have risen above your fixed rate, the bank can re-lend at a profit and the break fee drops to zero. The actual calculation uses each bank’s internal wholesale curve and a present-value discount, but the result lands close to the simple multiplication shown here.
Worked example
Hemi, marine engineer in Whangarei, weighing breaking a 5-year fix.
Hemi fixed a $500,000 loan at 7.20% three years ago, with two years still to run. New 1-year fixed rates at his bank now sit around 5.20%.
Rate gap is 7.20% − 5.20% = 2.00%. Applied to his $500,000 balance, that is $10,000 of annual interest the bank stands to lose by re-lending at the lower rate.
Multiplied by the remaining two years, the simple-maths break fee lands near $20,000. Each bank’s actual fee will use a present-value adjustment and its own wholesale curve, so the real number is usually 5-10% lower.
For Hemi, breaking the loan only makes sense if the next two years at the lower contract rate save him more than $20,000 in interest. At his $500,000 balance that requires the new rate to be at least 2% lower than the old one across the full remaining term, which is exactly the scenario the break fee is designed to neutralise.
Things to keep in mind
- The fee can be zero. When wholesale rates have risen above your fixed rate, the bank can re-lend at a profit. Most NZ banks set the break fee at zero in that case and you can break without cost. Check before assuming a fee applies.
- Each bank uses its own wholesale curve. The figures here are an order-of-magnitude estimate. ANZ, ASB, BNZ, Westpac, and Kiwibank each maintain their own internal swap rates, and the fees they quote can differ by a few thousand dollars on the same loan. Always ask the bank for a written break-fee quote before deciding.
- Partial early repayments also trigger a fee. A lump-sum repayment that exceeds the bank’s allowed annual extra (often 5% of the original loan) on a fixed-rate loan triggers a partial break fee on the over-amount. The simple-maths approach scales accordingly.
- Refix vs break is a separate question. Most bank break-fee disclosures only quote the fee. The decision to break depends on the new rate available for the remaining term, plus any establishment or legal fees on the new loan. The refinance calculator handles the broader comparison.
- Floating loans have no break fee. The bank cannot face a wholesale-rate loss on floating-rate lending, so floating loans (revolving credit, variable-rate home loans) carry no break fee. Switching out of a floating loan to a new lender costs only the new lender’s establishment fee and any legal cost.
NZ-specific notes
FAQs
Why does the bank charge a break fee at all?
When you fix a rate, the bank funds your loan from wholesale markets at a rate matched to that fixed term. If you break early, the bank still has to pay its wholesale lender for the original term, but can only re-lend the money at the new (lower) rate. The break fee covers the gap.
Can the break fee actually be zero?
Yes. If wholesale rates have risen above your fixed rate, the bank can re-lend at a profit and most lenders waive the break fee entirely. This was a common situation through 2022, when rates were rising sharply, and is what makes "no break fee to switch" advertising occasionally accurate.
Does paying a lump sum count as breaking the loan?
Partially, yes. Each NZ bank allows a small annual extra repayment without penalty (often 5% of the original loan balance per year). Anything above that is treated as a partial break, with a fee proportional to the over-amount.
Is the calculator’s estimate the same as the bank’s quote?
Close, but not identical. The calculator uses a simple multiplication. Banks apply a present-value discount to the future interest gap, and use their own internal wholesale curve rather than a single market rate. Real bank quotes are usually a little lower than the simple-maths estimate.
Can I avoid the fee by refixing instead of breaking?
Refixing within your existing bank, at the end of the current fixed term, costs nothing extra. Refixing midway through, while keeping the same bank, also avoids a third-party break, but the bank still applies its break-fee maths internally and charges you the same gap.
Does the fee apply to floating-rate loans?
No. Floating loans are funded against rolling short-term wholesale rates, so there is no fixed-term commitment for the bank to lose on. Breaking a floating loan to switch lenders costs only the new lender’s establishment fees and any legal cost.
References & sources
- Reserve Bank of New Zealand, "Wholesale interest rates (B2)". rbnz.govt.nz
- Commerce Commission, "Lending decisions on mortgages, credit cards and personal loans". comcom.govt.nz
- Reserve Bank Bulletin, "Break fees on home mortgages" (December 2008). rbnz.govt.nz
- Reserve Bank of New Zealand, "Bank lending statistics by fixed-rate term". rbnz.govt.nz