Fixed or floating? How to choose your mortgage term
Whether you’re a first home buyer or refixing, choosing between fixed and floating is one of the biggest decisions on your mortgage. Here’s how to think about it.
Fixed rates give certainty for a set term. Floating rates let you repay more without break fees but usually cost more. Many New Zealand borrowers fix most of their loan across one or two terms and keep a small floating or revolving portion for extra repayments.
By the Moneyplant Advice Team · Last reviewed October 2026
Fixed rates
Your interest rate stays the same for the term, usually anywhere from six months to five years. You know exactly what your repayments will be, which makes budgeting easier. The trade-off is flexibility: if you repay a lump sum or leave early, you may pay a break fee. Some lenders let you make small extra repayments each year without a fee.
Floating rates and revolving credit
A floating rate can change at any time, and you can repay as much as you like without break fees. Revolving credit works like a large overdraft: your pay goes in, spending comes out, and any money sitting in the account reduces the interest you pay. Some lenders also offer offset accounts, where your savings reduce the interest on part of your loan.
Splitting your loan
You don’t have to choose just one. Splitting your loan across different terms means not all of it comes up for refixing at once, which spreads your interest rate risk. A common setup is two fixed portions on different terms plus a small floating or revolving portion for extra repayments.
What to think about
- How much certainty your budget needs
- Whether you might sell, move or receive a lump sum soon
- Whether you want to make extra repayments
- When your other loan portions come up for refixing
When your fixed term ends
Your lender will usually send you rate options before your term ends. Don’t just accept the first offer. It’s a good time to review your structure, and our refixing advice can help you compare options.
This article is general information only, not personalised financial advice. Talk to us about your situation.
Common questions
Can’t see your question? Get in touch. There’s no such thing as a silly question.
What is a break fee?
A break fee is a cost some lenders charge if you repay or change a fixed loan before the term ends. It’s based on how interest rates have moved since you fixed.
Can I make extra repayments on a fixed loan?
Many lenders let you repay a small extra amount each year without a fee. Check your loan terms or ask us before paying a lump sum.
What happens when my fixed term ends?
Your loan usually rolls onto the floating rate unless you choose a new term. Your lender will send options beforehand, and it’s a good time to get advice.
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