Fixed or floating is one of the most common mortgage questions in NZ. This guide explains how each works, the trade-offs, and how split loans combine them. It's general information, not advice for your situation.
Checking Current Rates
Rates change often, so this guide doesn't list them. For current figures see interest.co.nz, and check rbnz.govt.nz for the latest Official Cash Rate (OCR) decision. Jagdip can talk you through the current options for your situation.
How Fixing Works
Fixing locks your interest rate for a set term, commonly between 6 months and 5 years. Your repayments stay the same for that term, which makes budgeting easier. If you're on a tight budget, certainty over your repayments has real value.
The trade-off: your repayments don't change for the fixed term, but if rates fall you won't benefit until the term ends, and breaking the term early can mean a break fee.
When fixing makes sense:
- Budget certainty is important to you
- You're not planning to sell or refinance in the next 1–2 years
- Your fixed-vs-floating differential is more than 1%
How Floating Works
A floating rate can change at any time, up or down, usually in step with the lender's own pricing. Floating rates are often higher than fixed rates. The trade-off is flexibility: you can usually make lump sum payments or repay the loan without a break fee.
When floating makes sense:
- You're expecting to sell your property in the next 6–12 months
- You have a large sum coming (bonus, inheritance) you want to pay off the mortgage
- You want maximum flexibility and don't want to be locked into a fixed term if your plans change
The Split Strategy
A split loan structure is part fixed, part floating. This gives you the certainty of a fixed rate on the bulk of your mortgage, while keeping a floating portion for flexibility.
| Example split | Fixed portion | Floating/revolving portion |
|---|---|---|
| Illustration: $500k mortgage | $400k on a fixed rate | $100k on floating or revolving credit |
| Benefit | Certain repayments on core debt | Flexibility to pay lump sums, redraw if needed |
Talking It Through
There's no single right answer. The best structure depends on your budget, how long you plan to stay in the property, whether you expect lump sums, and how much repayment certainty you want. Jagdip can walk you through how each option would work for your situation.
Important: Break fees on fixed loans can be significant if you need to refinance early. Always factor in your likely plans for the property before committing to a long fixed term. Jagdip calculates break fee risk before making any recommendation.
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