Fixed vs Floating Mortgage Rates

Which type of home loan rate is right for you? Compare the pros and cons.

Fixed Rate

5.69% - 6.49%

Current 2-year fixed rates

Advantages

  • +Certainty - know exactly what you'll pay
  • +Protected if rates rise
  • +Easier budgeting
  • +Usually lower than floating

Disadvantages

  • -Break fees if you exit early
  • -Miss out if rates fall
  • -Limited extra repayments (usually 5%/year)
  • -Less flexibility for selling/refinancing

Floating Rate

7.50% - 8.50%

Current floating rates

Advantages

  • +No break fees - switch anytime
  • +Unlimited extra repayments
  • +Benefit immediately if rates fall
  • +Flexibility for selling/refinancing

Disadvantages

  • -Usually higher than fixed rates
  • -Payments can increase unexpectedly
  • -Harder to budget long-term
  • -Risk if rates rise significantly

When to Choose Each Type

Choose Fixed When:

  • 1.You want certainty and budget stability
  • 2.Interest rates are expected to rise
  • 3.You're unlikely to sell in the next 2-3 years
  • 4.You're comfortable with limited extra repayments
  • 5.Fixed rates are significantly lower than floating

Choose Floating When:

  • 1.You might sell or refinance soon
  • 2.Interest rates are expected to fall
  • 3.You want to make unlimited extra repayments
  • 4.You have variable income (bonuses, commissions)
  • 5.You want maximum flexibility

The Split Mortgage Strategy

Many borrowers choose a split mortgage - part fixed and part floating. This gives you the best of both worlds.

Example: $600,000 Mortgage

Fixed 2-Year

$400,000

67% of loan

Floating

$200,000

33% of loan

Benefit

Extra repayments + certainty

Pro Tip: Laddering Strategy

Split your fixed portions across different terms (e.g., 1-year, 2-year, 3-year). This means you're always reviewing part of your mortgage annually, reducing the risk of being locked into unfavorable rates.

Current NZ Mortgage Rates (January 2026)

TermANZASBBNZWestpacKiwibank
Floating8.34%8.14%8.34%8.14%7.90%
1-year fixed6.29%6.19%6.29%6.29%6.19%
2-year fixed5.99%5.89%5.99%5.99%5.89%
3-year fixed5.89%5.79%5.89%5.89%5.79%
5-year fixed6.09%5.99%6.09%6.09%5.99%

Rates shown are indicative and change frequently. Check with banks for current rates.

Fixed vs Floating FAQs

Should I fix my mortgage rate in NZ?

Fix if you want certainty and rates are likely to rise. In 2026, with rates potentially falling, shorter fixed terms (1-2 years) or a split mortgage (part fixed, part floating) may be optimal.

What is the difference between fixed and floating rates?

Fixed rates stay the same for a set period (1-5 years), giving payment certainty. Floating rates move with market conditions, currently higher but offering flexibility and no break fees.

Can I switch from fixed to floating?

Yes, but you'll pay a break fee if you exit a fixed term early. Break fees can be substantial depending on how much rates have moved since you fixed.

What is a split mortgage?

A split mortgage has part of your loan on fixed rates and part on floating. This gives you certainty on some payments while maintaining flexibility on others.

How long should I fix my mortgage for?

Consider fixing for 1-2 years if rates are expected to fall, 3-5 years if they may rise. Most borrowers choose 2-year fixed as a balance of rate and flexibility.

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