It's one of the most common questions New Zealand homeowners ask, and it's especially timely right now. #

In September 2026, the Reserve Bank raised the Official Cash Rate (OCR) to 2.75%, its second increase in three years. Annual inflation climbed to 4.1% in the June quarter, up from 3.1% in March and above the Reserve Bank's 1 to 3% target band. Mortgage rates have moved in response, and several major banks have lifted their fixed rates over the past few weeks and months. 

If your loan is coming up for renewal, or you're taking out a new one, the fix-or-float decision is worth thinking through properly. 

The basics #

A fixed-rate mortgage locks in your interest rate for a set term, commonly six months, one year, two years or longer. Your repayments stay the same for that period, regardless of what happens to interest rates elsewhere. 

A floating (or variable) rate moves with the market, generally in line with the OCR and bank funding costs, so your repayments can go up or down at fairly short notice. 

Why rates are moving now #

After several years of the Reserve Bank cutting the OCR, July and September's hikes mark a change in direction. The Reserve Bank has said the previous rate was stimulating the economy more than intended, and that some of that stimulus needs to be withdrawn while inflation remains above target. Bank economists are divided on exactly what comes next, with some picking the rate to reach around 3%. This could easily change if the economic data over the coming months looks different to what's expected. 

The case for fixing #

Fixing gives you certainty. Your repayment amount is locked in, which makes budgeting easier and protects you if rates rise further. This is a real possibility, given where economists currently expect the OCR to go. With fixed rates currently well below floating rates, fixing also means paying less interest right now, not just insurance against future rises. The trade-off is flexibility: breaking a fixed loan early to refinance, sell, or make large lump-sum repayments beyond your contract's limits usually triggers a break fee, which can be significant if rates have moved a lot since you fixed. 

The case for floating #

Floating gives you flexibility. You can make extra repayments or pay off the loan entirely at any time without a break fee, which suits people expecting a windfall, planning to sell soon, or wanting to pay down debt aggressively. It also means you're not locked in if rates were to fall unexpectedly. The downside is that floating rates are currently well above fixed rates, so you're paying a premium for that flexibility, and your repayments could rise further if the Reserve Bank does lift the OCR again as many economists expect. 

A middle path: splitting your loan #

Many borrowers don't choose one or the other exclusively. Splitting a mortgage between a fixed portion and a floating (or short-term fixed) portion is a common way to get some rate certainty while keeping the flexibility to make extra repayments on part of the loan. Laddering, where you split fixed debt across a few different terms so it doesn't all come up for renewal at once, is another way to spread the risk of renewing everything into a single rate environment. 

What to weigh up #

The right call depends on your own situation more than on any rate forecast. It's worth considering how much certainty you need for your household budget, whether you're likely to sell or refinance within the next year or two, how much of a lump sum you might want to put toward the mortgage, and how you'd feel if rates rose another percentage point or more. You may also think about the break fee on any fixed term you're considering before you sign, since that number, not the headline rate, is what determines how much flexibility you're really giving up. If you're risk-averse or stretched financially, the certainty of fixing is often worth more than the flexibility of floating, even if it isn't the cheapest option in every scenario. 

Get advice specific to you #

This article is general information, not financial advice, and mortgage rates change frequently, sometimes within days. Before making a decision, it's worth talking to a mortgage adviser or your bank, who can review your income, goals and risk tolerance, and provide rates and terms specific to your situation.

A qualified adviser doesn't cost you anything extra in most cases, since they're typically paid by the lender, and can help you weigh up fixed, floating and split options properly rather than guessing based on today's headlines.

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