Loan types
Floating rate — total flexibility
A floating (or variable) rate mortgage moves up and down with the market. You pay more than a fixed rate day-to-day, but you get something valuable in return: freedom. No break fees, no lock-in, and the ability to repay as much as you want, whenever you want.
How it works
Your interest rate floats — it changes whenever your bank adjusts its variable rate. This usually happens when the Reserve Bank moves the Official Cash Rate (OCR), but banks can change it any time.
There's no fixed term, so there's no break fee. You can make extra repayments of any size, pay the whole thing off tomorrow, or switch banks without penalty.
Floating rates in NZ typically sit 1–2% above the best fixed rates. That premium buys you optionality.
Who it suits
- —People planning to sell within the next 6–12 months
- —Anyone expecting a lump sum (inheritance, bonus, sale proceeds) they'll throw at the mortgage
- —People who want a small floating portion alongside fixed — gives flexibility without costing much
- —Those who believe rates are about to drop and want to benefit immediately
Pros and cons
Pros
- No break fees ever
- Unlimited extra repayments
- You benefit immediately when rates drop
- Complete freedom to sell, switch, or repay
Cons
- Higher rate than fixed — typically 1–2% more
- Repayments can go up without warning
- Harder to budget when your payment keeps changing
- You pay more overall if rates rise and stay high
The common play: a floating "pocket"
Most people don't put their entire mortgage on floating. Instead, they keep a small chunk (say $20,000–$50,000) floating and fix the rest. That way you have a portion you can attack with extra payments without hitting break fee territory on your main fixed loan.
We can help you figure out whether a floating pocket, revolving credit, or an offset account is the best way to get that flexibility.
Want flexibility without overpaying?
We'll work out the right mix of fixed and floating for your situation — and show you how much it could save.
