When you’re hunting for the right home loan, one of the biggest decisions you’ll face is whether to go with a fixed or floating mortgage rate. Both options have their pros and cons, and the right choice will depend on your financial situation, risk tolerance, and future plans.
In this guide, we’ll break down the differences between fixed and floating rates, and help you figure out which type of mortgage might be the best fit for you.
What is a Fixed Mortgage Rate?
A fixed-rate mortgage locks in your interest rate for a set period—typically between 1 to 5 years. During that time, your repayments will stay the same, regardless of what happens in the wider market.
Benefits of a Fixed Rate:
- Predictability: Your repayments won’t change, making budgeting easier.
- Protection: You’re shielded from any interest rate hikes during your fixed term.
- Peace of mind: You’ll know exactly what you’re paying, which helps with long-term planning.
Things to Consider:
- Less flexibility: If interest rates drop, you won’t benefit from the lower rate unless you break your loan (which can come with hefty break fees).
- Break costs: Want to make extra repayments, refinance, or sell your home? You might face penalties.
What is a Floating Mortgage Rate?
A floating rate (or variable rate) changes over time, based on the lender’s rate movements, which are often influenced by the Official Cash Rate (OCR) set by the Reserve Bank of New Zealand.
Benefits of a Floating Rate:
- Flexibility: You can make extra repayments or pay off your loan early without penalty.
- Potential savings: If interest rates drop, so will your repayments.
- Great for short-term loans or bridging finance.
Things to Consider:
- Less certainty: Your repayments could increase if interest rates rise.
- Harder to budget: The unpredictability can make long-term financial planning tricky.
So, Which One Should You Choose?
There’s no one-size-fits-all answer. Here are some scenarios to help you decide:
- Go fixed if:
You’re buying your first home and need stability. You like knowing exactly how much you’re paying every month. You think rates might go up soon. - Go floating if:
You’ve got room in your budget to absorb fluctuations. You plan to make lump-sum repayments. You think rates might drop—or just want more flexibility.
Can You Split Your Mortgage?
Yes! In fact, many Kiwis choose to split their mortgage between fixed and floating portions. This gives you the best of both worlds—some stability, with a bit of flexibility. A mortgage advisor can help structure this in a way that suits your goals.
What Are Mortgage Rates Doing in 2025?
As of early 2025, we’re seeing a bit of a shift in the market. While fixed rates had been trending upwards through 2023 and 2024, there’s talk of softening as inflation starts to ease. Floating rates are still closely tied to the OCR, which remains a key figure to watch.
But the market changes quickly—what’s right today might not be right tomorrow. That’s where a mortgage advisor can really help, offering personalised advice based on your unique situation.
Talk to a Mortgage Advisor
At Lendall Mortgages, we help everyday New Zealanders make confident, informed decisions about their home loans. Whether you’re tossing up between fixed and floating rates, or looking to restructure your existing mortgage, we’re here to help.
Ready to talk numbers?
Get in touch today for a free, no-obligation chat. We’ll guide you through the options and find a solution that works for you.
