Fixing or Floating Your Home Loan: What’s the Right Choice?
The benefits of a floating mortgage rate
Floating rates, on the other hand, are constantly adjusted according to market interest rates and the Official Cash Rate (OCR). While they are usually higher than fixed rates, floating loans offer greater flexibility. You can make lump‑sum repayments, restructure your loan, or refinance without penalty. This can suit borrowers who expect changes in income, plan to sell or refinance soon, or want to pay their loan down faster. However, floating rates can rise at any time, which can make your regular repayments less predictable.
Something else to consider
When refixing, it’s important to think beyond the interest rate. Consider how long you plan to stay in the property, whether your income is likely to change, and how much flexibility you may need over the next few years.
Here’s one answer
Many borrowers choose a split‑loan approach, especially in times of economic uncertainty. This involves fixing a portion of your mortgage for stability while keeping the remainder on a floating rate for flexibility. This can help balance the different characteristics of a fixed versus a floating mortgage rate.
Refixing is an opportunity to review whether your mortgage still supports your wider financial goals. That’s why it makes sense to contact your Futurisk Mortgage Adviser. We will provide you with information that enables you to properly consider your options and ensure your home loan remains fit for purpose, even in uncertain times.
A perennial question for New Zealand homeowners, especially during times of uncertainty in global financial markets, is, “What should I do when my home loans come up for refixing: Should I lock in a fixed rate, move to a floating rate, or consider a combination of both?”
The answer
Unfortunately, there is no one‑size‑fits‑all answer. The best decision for you depends less on trying to predict where interest rates might go next, and more on your personal circumstances and cash flow, and how comfortable you feel with whatever decision you make.
The benefit of a fixed mortgage rate
Fixed rates provide certainty. By fixing your interest rate for a set period, your repayments remain the same regardless of market movements. This can make budgeting easier and offer peace of mind, particularly if your household budget is tight or you would struggle to absorb higher repayments.
While fixed rates are often lower than floating rates, they typically come with less flexibility. Making extra repayments or breaking the loan early can result in fees.