Fixed vs Floating Mortgage: What’s Better in NZ This Year?
When you’re taking out a home loan in New Zealand in 2026, one of the biggest decisions you’ll make isn’t just how much you borrow, but how your interest rate is structured. The choice between a fixed and a floating (variable) mortgage can have a major impact on your repayments, cash flow and long-term financial comfort.
Both options have their supporters — but which one makes more sense for you this year? Let’s break it down.
What’s the Difference?
Fixed Rate Mortgage
A fixed interest rate means your rate, and often your monthly repayment amount, is locked in for a specified term — typically 1, 2, 3 or 5 years. No matter how market rates change during that period, your rate stays the same.
Floating (Variable) Rate Mortgage
A floating rate moves up and down with the wider mortgage market, usually influenced by the Official Cash Rate (OCR) and banks’ lending policies. Your repayments can change when the broader market changes.
Many New Zealand borrowers also choose a split loan, fixing part of their mortgage and leaving part floating to capture benefits from both.
Fixed Rate: Stability and Certainty
Pros of a Fixed Rate
Budgeting certainty: Your monthly payments are predictable — helpful if your household cash flow doesn’t allow surprises.
Protection against rate hikes: If the Reserve Bank lifts the OCR again, you’re insulated for the length of your fixed term.
Peace of mind: For many buyers, fixing reduces stress — you always know what you owe.
Cons of a Fixed Rate
Less flexibility: If you want to pay off your loan early or make extra payments, some fixed loans carry penalties or limits.
Missed savings if rates fall: If floating rates drop below your fixed rate, you could miss out on lower in recent years, fixed rates in NZ have often been lower than floating rates, making them attractive from day one — but this isn’t always guaranteed.
Floating Rate: Flexibility and Opportunity
Pros of Floating
Flexibility: You can usually make extra or lump-sum repayments without penalty.
Potential savings: If market rates fall, your repayment amounts can fall too.
Cons of Floating
Repayment uncertainty: Your repayments can increase if interest rates rise — and they’ve been historically higher than fixed at times.
Budget risk: Variable repayments can be harder to forecast — especially for tighter household budgets.
So, What’s Better in 2026?
There’s no one-size-fits-all answer — it depends on your financial goals, risk tolerance, and market outlook.
When Fixed Might Be Better
You value certainty over flexibility
You want to lock in predictable payments
You’re budgeting tightly for the year ahead
When Floating Might Be Better
You expect rates to fall further
You want the freedom to make extra repayments
You can absorb potential short-term rate increases
Many advisers suggest splitting your mortgage — fixing a larger portion for stability and leaving a smaller portion floating for flexibility. This strategy bridges the gap between the two approaches.
Final Thoughts
In 2026, with mortgage rates still influenced by OCR shifts and global economic trends, deciding between fixed and floating comes down to comfort with uncertainty vs love of flexibility. Both options have strong merits — and both can work if chosen wisely.
Talking to a mortgage adviser can help you tailor your decision to your personal plans, cash flow, and how long you intend to stay in your home.
Because when you choose the right rate structure for you, you don’t just buy a home — you buy peace of mind.