Loan types
Fixed rate mortgages — lock in your rate
A fixed rate means your interest rate stays the same for an agreed period — usually 6 months to 5 years. Your repayments don't change, no matter what the Reserve Bank does. It's the most popular mortgage structure in New Zealand for good reason: you can budget with confidence.
How it works
When you fix your rate, you and the bank agree on an interest rate for a set term. One year is the most popular in NZ — banks compete hardest on 1-year fixed rates, which is why you'll often see them advertised loudly.
During the fixed period, your repayments stay the same regardless of what happens to the Official Cash Rate (OCR). When the term ends, you "roll off" onto a new rate — either fixing again, or moving to floating.
Most people split their mortgage across multiple fixed terms (say, half on 1-year and half on 2-year). This is called a "split structure" and it reduces the risk of everything rolling off at a bad time.
Who it suits
- —First home buyers who want predictable payments while they adjust to homeownership
- —Families on a single income or tight budget who can't absorb rate rises
- —Anyone who sleeps better knowing exactly what's going out each pay cycle
- —People who think rates are about to go up and want to lock in now
Pros and cons
Pros
- Certainty — your repayments won't change
- Easy to budget around
- Banks compete hard on 1-year rates, so you often get a good deal
- Protects you if rates rise during your fixed term
Cons
- Break fees if you want to repay early or sell before the term ends
- You miss out if rates drop significantly
- Most banks limit extra repayments to $10,000–$20,000 per year
- Less flexibility than floating or revolving credit
What about break fees?
If you sell your house, repay the loan, or switch banks before your fixed term ends, the bank may charge a break fee. The fee depends on how much rates have moved since you fixed. If rates have dropped a lot, the fee can be significant. If rates have gone up, the fee is often zero.
This is one reason we often suggest splitting across terms — so only part of your loan is locked at any one time.
Not sure which fixed term is right?
We'll look at where rates are heading and what suits your plans — whether you're buying your first home or refixing an existing mortgage.
