Why term length matters
When you fix your mortgage rate, you're making a bet on where interest rates are heading. Choose too short and you risk refixing at a higher rate; choose too long and you might miss out on lower rates. Getting it right can save you thousands.
NZ fixed term options
Most New Zealand banks offer fixed terms of 6 months, 1 year, 18 months, 2 years, 3 years, 4 years, and 5 years. The most popular choices are 1-year and 2-year terms. See current rates for all terms.
Short-term fixes (6 months – 1 year)
Best when:
- Interest rates are expected to fall
- You want to refinance or sell in the near future
- You want flexibility to restructure your mortgage soon
Trade-off:
You refix more often, which means more exposure to rate changes. But in a falling rate environment, this works in your favour.
Medium-term fixes (2–3 years)
Best when:
- Rates are at a level you're comfortable with
- The rate outlook is uncertain
- You want a balance of certainty and flexibility
Trade-off:
A good middle ground. You're protected for a reasonable period without committing for too long.
Long-term fixes (4–5 years)
Best when:
- Interest rates are at historic lows and likely to rise
- You want maximum certainty and budget stability
- You don't plan to sell or make major changes
Trade-off:
Longer terms usually have higher rates. Break fees are also larger if circumstances change.
The mortgage ladder strategy
Instead of putting your entire mortgage on one term, split it across multiple terms. For example:
- 1/3 on a 1-year fix
- 1/3 on a 2-year fix
- 1/3 on a 3-year fix
This way, a portion of your mortgage comes up for renewal every year, smoothing out rate fluctuations and giving you regular opportunities to adjust.
Frequently asked questions
Should I choose a short-term (1–2 year) or long-term (4–5 year) fixed mortgage?
Short-term rates are typically lower, saving interest if rates don't rise. Long-term rates offer certainty and protection if rates spike. Choose short-term if you expect rates to fall; choose long-term if rates are rising or you prefer payment certainty. Use our calculator to compare your scenarios.
What is mortgage laddering and why would I use this strategy?
Mortgage laddering splits your loan into multiple fixed-rate portions with staggered expiry dates (e.g., 25% at 1-year, 25% at 2-year, 50% at 3-year). This spreads refinancing risk, allows you to lock in rates multiple times per year, and potentially reduce your overall rate through competition. It's ideal for borrowers wanting flexibility without abandoning certainty.
Is a 30-year mortgage term better than 25 years?
A 30-year term lowers your monthly repayment (often by $200–$300), but costs significantly more in total interest. A 25-year term requires higher monthly payments but you own the property 5 years sooner and pay substantially less interest. Choose based on your budget and goals; use our calculator to see the real difference.
Can I shorten my mortgage term if rates fall?
Yes. When your fixed term ends, you can refinance to a shorter term (e.g., from 30 to 25 years) without penalty. If rates have fallen significantly, the new higher payment may still be lower than your current payment. Alternatively, make extra repayments against a longer-term mortgage to shorten it without formal refinancing.
What mortgage term should I choose as a first home buyer?
Most first home buyers choose 2–3 year fixed terms to balance low rates with flexibility to refinance frequently as they learn their financial situation. Some prefer 3–4 year terms for greater certainty. Avoid locking into 5-year terms early unless you're confident rates are peaking.
Compare rates across all mortgage terms
See current rates for every fixed term and floating option from all NZ lenders in one place.