How NZ banks calculate mortgage interest: daily, monthly, rounding

New Zealand banks calculate mortgage interest daily and charge it monthly: each day’s balance is multiplied by the yearly rate divided by 365, and the total is added to your loan once a month. Most calculators, including BNZ’s own and ours by default, simplify that to the yearly rate divided by 12 (or 26 or 52). On a $500,000 loan at 5.06% (the average advertised one-year fixed rate, as at 10 November 2026) that is $69.32 of interest a day, or $2,108.33 a month on the simple method. A 31-day month actually costs $2,148.77 and a 28-day month $1,940.82. Over 30 years the two methods differ by well under 1%. Banks do not publish their exact rounding rules.

Interest is worked out daily and charged monthly

Two of the big banks state this directly. ASB: “Interest on your loan balance is calculated and accrued daily and charged monthly.” ANZ: “Interest is calculated daily, so every day you have a reduced balance counts.” We treat this as the norm across New Zealand banks.

In practice it works like this:

1. Each day, the bank takes your closing loan balance and multiplies it by the yearly rate divided by 365. That is the day’s interest.
2. It adds up (accrues) each day’s interest without charging it yet.
3. Once a month, on the interest charge date, it adds the accrued total to your loan balance.
4. Your repayments come off the balance on their own dates, which may not be the same as the interest charge date.

On $500,000 at 5.06%, one day’s interest is $500,000 × 5.06% ÷ 365 = $69.32. Any money you pay in early, or hold in a linked offset account, reduces the balance from that day, so it starts saving interest straight away.

Day count is the one detail we could not confirm. Neither ASB’s nor ANZ’s page says whether a leap year is divided by 365 or 366. Some secondary sources say 366; no bank page we read says so. Our calculators use 365 throughout and say so.

What calculators do: the rate ÷ 12 shortcut

A repayment calculator needs a rate per repayment. The standard approach divides the yearly rate by the number of repayments a year: 12 for monthly, 26 for fortnightly, 52 for weekly. It then uses the annuity formula to find the repayment that clears the loan exactly over the term. Our guide to how mortgage repayments work walks through it.

That shortcut treats every month as exactly one twelfth of a year. Banks’ own calculators do the same. BNZ’s calculator says: “For monthly repayments, this calculator works out interest as if every month has the same number of days”, and adds that “Actual amounts may vary slightly due to rounding.” The legislated example in the credit regulations ($5,000 at 12% over 24 months, $235.37 a month) is reproduced exactly by this method too.

On our example loan, the simple method gives a repayment of $2,702.48 a month. In the first month $2,108.33 of that is interest and $594.15 reduces the loan.

Why some months cost more than others

Under daily accrual, interest follows the calendar. Months with more days carry more interest. Here is one month’s interest on a $500,000 balance at 5.06%:

If you keep the same $2,702.48 repayment, the split between interest and principal shifts a little each month, but over a year it evens out: 365 days of interest either way. In our day-by-day simulation of this loan starting on 10 November 2026, the first four interest charges are $2,079.45 (30 days to 10 December), $2,146.09 and $2,143.70 (two 31-day months, on a slightly lower balance each time) and $1,934.07 (28 days to 10 March).

BNZ’s switch to actual days (5 May 2024)

BNZ changed its method for Classic and Standard home loans with monthly repayments from 5 May 2024. Before then, it said, “we multiplied your daily interest charges by the average number of days in a month (30.4167 days)”, so each month carried an even one twelfth of a year’s interest. Since then, “interest will be calculated based on the actual number of days in each repayment period”: 28 to 31 days.

BNZ says that for principal and interest loans “the total monthly repayment stays the same”. For interest-only loans, though, the payment now moves with the month. On $600,000 at 4.99%:

BNZ’s weekly and fortnightly loans were already on actual days: “we calculate interest based on the number of days in those repayment periods (7 or 14 days respectively).” Other banks’ exact conventions for monthly loans were not published on the pages we read.

Weekly and fortnightly: 52 weeks is 364 days

For weekly and fortnightly loans there are two ways to get the rate per repayment: divide the yearly rate by 52 or 26, or charge 7 or 14 days at the daily rate (yearly rate ÷ 365). The second is slightly smaller, because 52 weeks are 364 days, one short of a year.

The difference is about a dollar a week. These are true weekly and fortnightly repayments, each worked out as its own loan. Paying half the monthly repayment every fortnight is a different thing that pays the loan off years early; see fortnightly vs monthly repayments and weekly repayments.

Does the method change what you pay overall?

Very little. We ran the $500,000 loan at 5.06% both ways with the same $2,702.48 monthly repayment:

• Simple method: 360 repayments, the last one $2,696.35, total interest $472,887.
• Daily method (actual days, charged monthly, from 10 November 2026): 360 full repayments plus a final $747.13, total interest $473,640.

That is a difference of about $753 over 30 years, or 0.16%. It arises because charging interest at month end means it is charged a little later than the simple model assumes in some months and earlier in others, and because the calendar includes leap years. The point for borrowers: the headline repayment from any good calculator is reliable, and you do not need to worry about which method your bank uses for budgeting.

What daily interest means for you

Daily accrual has a few practical consequences worth knowing:

• Extra money starts saving the day it arrives. A lump sum paid on the 2nd of the month saves interest from the 2nd, not from the next repayment. Paying a bonus in as soon as you receive it is slightly better than waiting.
• Interest-only payments move with the calendar at banks that charge actual days, as BNZ now does. Budget for the highest month (31 days), not the average.
• Offset and revolving loans depend on daily balances. With an offset mortgage, each day’s linked balance counts. A large balance that sits for only a day or two before being spent saves very little.
• Your statement may not match a calculator exactly. A small difference from month to month is normal. What matters is that the balance falls as expected over a year.

To check your own loan, take your current balance, multiply by your rate and divide by 365 to get the daily interest, then multiply by the days in the month. Compare that with the interest on your statement; it should be close.

Rounding: no bank publishes its rule

None of the bank pages we read states how it rounds. BNZ says only that “Actual amounts may vary slightly due to rounding.” The credit regulations’ worked examples round money to the cent and note that intermediate figures are rounded to nine decimal places.

Our approach is to carry full precision, show each repayment rounded up to the next cent so the loan is always repaid within its term, and let the last repayment absorb the difference (which is why the final repayment is usually a little smaller). Your bank’s figure may differ by a few cents a repayment, and its final repayment by a few dollars.

This is general information, not financial advice. Rates as at 10 November 2026.

Questions people ask

Do NZ banks charge mortgage interest daily or monthly?

Both. ASB and ANZ say interest is calculated daily on your balance; ASB adds that it is charged (added to the loan) monthly. On $500,000 at 5.06% that is $69.32 a day.

Why does my interest change from month to month when my rate has not?

Because months have different numbers of days. On $500,000 at 5.06%, a 31-day month carries $2,148.77 of interest and a 28-day month $1,940.82. Your principal and interest repayment usually stays the same; only the split changes.

Is a calculator using rate ÷ 12 wrong?

No. BNZ’s own calculator does the same for monthly loans. Over a 30-year $500,000 loan at 5.06%, the simple and daily methods differ by about $753 in total interest, or 0.16%.

Does my bank use 365 or 366 days in a leap year?

We could not confirm it. No bank page we read states a leap-year rule. Our calculators use 365 days in every year.