NZ Mortgage Strategy during Middle East Conflict

We've had a number of clients get in touch this week asking whether the Middle East conflict should change what they do with their mortgage. The short answer is: it's worth paying attention, and some clients are taking action right now.

Wholesale rates have already moved

The strikes on Iran pushed oil above $110 per barrel almost immediately, driven by disruption to the Strait of Hormuz, through which around 20% of global oil supply flows. Higher oil prices lift inflation expectations, and wholesale interest rates followed. When wholesale rates rise faster than retail mortgage rates, bank margins compress and banks respond by lifting mortgage rates. That pressure is building right now.

This is not happening in isolation. New Zealand's inflation was already running at 3.1% at the end of 2025, above the RBNZ's target band, and the major banks had already signalled that the OCR cutting cycle was over. The geopolitical situation has added further pressure on top of an existing trend.

How long will this last?

Nobody can say with certainty. US mid-term elections and the political cost of $110 plus oil give Trump reason to want this resolved quickly. But Iran has a new Supreme Leader, has publicly rejected ceasefire talks, and the broader region remains volatile. We prefer not to build financial decisions around geopolitical forecasts. The risk picture today points clearly toward upward pressure on rates in the near term.

What clients are doing

Everyone's situation is different and this is not blanket advice. But the clients we are currently working with are focused on one question: where are my break fees low enough that acting now makes sense?

When a fixed term is close to its refix date, break fees are typically negligible. For clients with refixes in the next six months, it is worth calling the bank this week to ask what an early refix would cost and locking in before rates move. For loans with more time to run, higher break fees change the equation and doing nothing is also a valid decision.

The approach we take

We look at the balance of risks, factor in reasonable expectations, and find a sensible middle ground. Right now that means taking low-cost actions where available and not over-engineering the rest. If you would like to talk through your own situation, get in touch and we can work through it together.