Why is the floating rate higher than fixed rates in NZ?

The floating rate includes a premium for flexibility — you can pay it off, make unlimited extra payments, and redraw without break fees. Banks price this flexibility into the rate. NZ floating rates typically sit 0.5–1.5% above the cheapest 1–2 year fixed rate.

What is a break fee and when does it apply?

A break fee is charged when you exit a fixed rate mortgage before the term ends — by selling, refinancing, topping up, or paying off early. If rates have fallen since you fixed, break fees can be several thousand dollars. If rates have risen, the fee may be zero. Always get an exact quote from your bank before deciding.

What is the split loan strategy?

A split loan divides your mortgage into two portions — typically 60% fixed for certainty and 40% floating for flexibility. The fixed portion gives predictable payments. The floating portion allows unlimited extra repayments without break fees and benefits from OCR cuts. It is widely recommended by NZ mortgage advisers.

NZ Variable vs Fixed Rate Mortgage Calculator

Q: Should I fix or float when the RBNZ is cutting rates?

When the RBNZ is cutting rates, floating rates tend to fall over time. Staying floating or fixing short-term (1 year) lets you benefit from falling rates. However, fixed rates already price in anticipated OCR cuts. A split strategy — part floating, part short-fixed — is often optimal when rates are falling.

Q: When should I lock in a new fixed rate before my term expires?

Most NZ banks allow you to lock in a new fixed rate up to 60–90 days before your current term expires at no cost. If rates are rising, locking in early secures today's rate. If rates are falling, waiting captures further cuts. A mortgage adviser can help based on wholesale rate forecasts and your situation.

Compare floating and fixed mortgage rates for New Zealand. See your monthly payment at each fixed term (1, 2, 3, 5 years) versus floating rate, model total 5-year costs, and use the split loan and break fee tools to choose the right rate strategy.

Loan Amount

Loan Term

Variable (Floating) Rate

1-Year Fixed Rate

2-Year Fixed Rate

3-Year Fixed Rate

5-Year Fixed Rate

Expected OCR Direction

Monthly Payment Comparison

NZ$3,694

Best option: 2-year fixed at 6.3% — OCR falling favours floating long-term

Floating Rate

NZ$4,195/mo

1-Year Fixed

NZ$3,792/mo

2-Year Fixed

NZ$3,694/mo

3-Year Fixed

NZ$3,753/mo

5-Year Fixed

NZ$3,912/mo

OCR Forecast Variable

NZ$3,892/mo

Advanced

Advanced Analysis

NZ market context, break fee risks, historical variable vs fixed performance

New Zealand has a unique mortgage market. Understanding the typical rate structure helps you decide when to fix and when to float.

Floating Rate (7.5%)

NZ$4,195/mo

Moves with OCR. Currently 1.3% above your best fixed rate. No break fees — can make unlimited extra repayments. Rate changes monthly.

1–2 Year Fixed (historically cheapest)

NZ$3,694/mo

NZ 1–2yr fixed historically the cheapest part of the yield curve. Rate certainty for 12–24 months. Break fees apply if you need to exit early.

How to Use This NZ Variable vs Fixed Rate Calculator

Enter your loan amount and current rates for floating and each fixed term. Select the expected OCR direction from the RBNZ. The calculator shows your monthly payment for each option and models total costs over 5 years, accounting for refix scenarios when fixed terms expire.

This calculator is specific to New Zealand’s mortgage market, where 1–2 year fixed rates are the most popular terms and the RBNZ Official Cash Rate drives the floating rate.

NZ Rate Structure Explained

Floating rate: Moves with OCR — currently 0.5–1.0% above short fixed
1-year fixed: Short certainty — refix frequently
2-year fixed: Most popular NZ term — often cheapest historically
3-year fixed: Middle ground — moderate certainty
5-year fixed: Maximum certainty — carries rate premium

Break fee: Floating = $0. Fixed = can be $0–$10,000+ depending on rate differential

Unlike Australia, New Zealand does not have offset accounts at the same scale — making the floating vs fixed decision more purely about rate and payment certainty.

Example: Split Loan Strategy

David and Sarah — $650,000 Mortgage in Auckland

Total Loan	$650,000
Fixed Portion (60%)	$390,000 @ 6.25% 2yr fixed
Floating Portion (40%)	$260,000 @ 7.50% floating
Fixed monthly payment	$2,528
Floating monthly payment	$1,819
Total monthly payment	$4,347
100% floating alternative	$4,548/mo
Monthly saving from split	$201/mo
Extra repayments possible	Yes — on floating portion

The split strategy gives David and Sarah certainty on 60% of their loan while keeping 40% floating for extra repayments and to benefit from any OCR cuts.

Frequently Asked Questions

The floating rate includes a premium for flexibility — you can pay it off at any time, make unlimited extra payments, and redraw if needed, all without break fees. Banks price this flexibility into the rate. Typically NZ floating rates sit 0.5–1.5% above the cheapest 1–2 year fixed rate. The gap widens when the OCR is expected to fall, as fixed rates price in future OCR cuts.

A break fee is charged when you exit a fixed rate mortgage before the term ends — whether by selling, refinancing to another lender, topping up the loan, or paying it off early. The fee compensates the bank for replacing your rate in the wholesale market. If rates have fallen since you fixed, break fees can be substantial — several thousand dollars. If rates have risen, the fee may be zero. Always get an exact quote from your bank before deciding.

When the RBNZ is in a rate-cutting cycle, floating rates tend to fall over time. Staying floating or fixing for only a short term (1 year) lets you benefit from falling rates. However, fixed rates already price in anticipated OCR cuts, so the advantage of floating may be smaller than it appears. A split strategy — part floating, part short-fixed — is often optimal when rates are falling.

A split loan divides your mortgage into two portions — typically 60% fixed for certainty and 40% floating for flexibility. The fixed portion gives you a predictable payment even if rates rise. The floating portion allows unlimited extra repayments without break fees, and lets you benefit from OCR cuts. It is considered the best-of-both-worlds approach and is widely recommended by NZ mortgage advisers.

Most NZ banks let you lock in a new fixed rate up to 60–90 days before your current fixed term expires, at no cost. If rates are rising, locking in early secures today's rate. If rates are falling, waiting until expiry captures further cuts. In an uncertain environment, a mortgage adviser can help you decide based on wholesale rate forecasts and your personal circumstances.