With the OCR at 2.25% and one-year fixed mortgage rates around 5.3%–5.6% as of early 2026, the fix-or-float question is front of mind for every NZ borrower coming off a fixed term. Here's the framework Jagdip uses with clients every week.
Where NZ Interest Rates Are Right Now
| Rate type | Approximate level (April 2026) |
|---|---|
| RBNZ Official Cash Rate (OCR) | 2.25% |
| 6-month fixed (major banks) | 5.3%–5.6% |
| 1-year fixed (major banks) | 5.2%–5.5% |
| 2-year fixed | 5.0%–5.4% |
| Floating / revolving credit | 6.5%–7.0% |
The OCR has come down significantly since the 2023 peak of 5.5%. Markets currently expect the OCR to remain around 2.25%–2.50% through 2026 before potentially moving again in 2027.
The Case for Fixing Now
Fixed rates are currently well below floating rates, so locking in a 1 or 2-year fixed rate gives you certainty and is cheaper than floating right now. If you're on a tight budget, certainty over your repayments has real value.
Key advantage of fixing: If rates rise unexpectedly (e.g. inflation surprises), you're protected. Your repayments don't change for the fixed term.
When fixing makes sense:
- Budget certainty is important to you
- You're not planning to sell or refinance in the next 1–2 years
- You believe rates have bottomed or are near the bottom
- Your fixed-vs-floating differential is more than 1%
The Case for Staying Floating
Floating rates are higher right now, but they offer flexibility. You can make lump sum payments without penalty, and if rates continue falling your rate follows automatically.
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 strongly believe the OCR will fall further and want to capture that immediately
The Split Strategy
Many of Jagdip's clients use a split loan structure: 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 |
|---|---|---|
| $500k mortgage | $400k: 1yr fixed at 5.39% | $100k: revolving credit at 6.6% |
| Benefit | Certain repayments on core debt | Flexibility to pay lump sums, redraw if needed |
Jagdip's Take for 2026
For most owner-occupiers right now, Jagdip generally recommends fixing for 1 year. The 1-year rate is competitive and gives you flexibility to reassess in 12 months when the rate outlook may be clearer. For investors with cashflow sensitivity, a longer fix can provide budget certainty over a longer planning horizon.
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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