Interest rates may have eased but there’s still plenty of uncertainty about where they’re headed next. Economists are forecasting the Official Cash Rate (OCR) to settle between 2% and 3%, with fixed mortgage rates expected to level out around 3.5% to 6%. With the outlook continuing to shift, many homeowners are opting for shorter fixed terms. So, how do you decide whether to fix, float or do a bit of both? It starts with understanding how each option works and how it could impact your home loan.
Should you fix your mortgage?
Fixing your mortgage means locking in a specific interest rate for a set period of time. Your mortgage repayments stay the same regardless of market fluctuations.
Fixing can be a smart move when:
- Interest rates are rising or are expected to rise
- You want certainty and stable repayments
- You need to budget for your mortgage without any surprises
Shorter-term fixed rates, between one and two years, are a popular option for many homeowners in New Zealand at the start of 2026, but there’s still value to be found in splitting the mortgage across longer loan terms. It all comes down to how much flexibility or certainty you need, what your future plans are, and where you think interest rates are likely to go next.
- Shorter loan terms (between 6 and 12 months) are more flexible and suit homeowners who expect their circumstances to change (for example, a new job, selling or refinancing).
- One to two-year loan terms are popular with current borrowers because they offer a good balance of stability and flexibility.
- Longer loan terms (two to five years) generally suit homeowners who want peace of mind knowing they don’t have to think about the mortgage for several years.
Should you leave it on floating?
A floating or variable interest rate moves up or down based on market conditions. Unlike fixed interest rates, floating rates are flexible, allowing borrowers to make extra repayments into their mortgage.
Leaving your mortgage on a floating interest rate could be the right move if:
- Interest rates are expected to drop further
- You plan to sell or refinance soon
- You want flexibility to make extra lump sum repayments
- You’re using features like an offset account or revolving credit
Splitting across fixed and floating
A split loan divides your mortgage into two or more separate portions each on a different fixed term or on a floating interest rate. It essentially gives you both security and flexibility.
- Splitting your loan reduces the risk of fixing your whole mortgage at the wrong time and potentially losing out if interest rates drop
- Choosing different fixed rate terms means only a portion of your mortgage matures at once so the risk of refixing at a peak rate is reduced
- Leaving some of your loan on floating means you can make extra lump sum repayments to reduce your principal loan without any penalties
Get help deciding
Choosing whether to fix, float or split your home loan across different fixed terms isn’t about guessing where interest rates are headed next, but rather about finding the right balance that works for you.
A mortgage adviser can review your finances and help you decide the level of change you’re comfortable with. They can also provide advice about current interest rate trends and lender policies and help structure your loan in a way that gives you the right mix of certainty and flexibility.
If you’d like help reviewing your mortgage, structuring your loan, or getting advice about refinancing or refixing, reach out to the team at Mortgage Express.
