Fixed vs Floating Mortgage Rates – What First Home Buyers Should Know in New Zealand
One of the first decisions first home buyers face sounds deceptively simple:
“Should we fix our mortgage, or go floating?”
It’s usually asked after a long day of open homes, paperwork, and information overload — and often answered with advice from friends, family, or online comments.
The truth is, this decision deserves more than a quick answer.
Why This Choice Matters More Than You Think
Your interest rate isn’t just a number.
It affects:
- Your weekly cash flow
- How stressed you feel when rates change
- How flexible your mortgage is
- Your ability to make extra repayments
For first home buyers especially, certainty and confidence matter just as much as cost.
Fixed Mortgage Rates: Certainty and Stability
A fixed rate means your interest rate stays the same for a set period — often one, two, or three years.
Many first home buyers prefer fixed rates because:
- Your repayments don’t change during the fixed term
- Budgeting is easier
- There are no surprises if interest rates rise
When everything else about home ownership is new, having predictable repayments can feel reassuring.
However, fixed rates usually come with trade-offs:
- Limited ability to make large extra repayments
- Break fees if you need to change the loan early
Floating Mortgage Rates: Flexibility and Control
Floating rates move up and down with the market.
They’re often higher than fixed rates, but they offer flexibility:
- You can make extra repayments without penalty
- You can pay off lump sums at any time
- You’re not locked in
Floating rates can work well if:
- Your income varies
- You expect to receive bonuses or lump sums
- You want maximum flexibility
The downside? Repayments can change — and that uncertainty isn’t comfortable for everyone.
Why Many First Home Buyers Use a Combination
This is something many people don’t realise early on.
You don’t have to choose only one.
Splitting your mortgage allows you to:
- Fix part of the loan for stability
- Float part of the loan for flexibility
- Spread risk over time
For many first home buyers, this balanced approach provides both peace of mind and control.
A Final Thought
There is no universally “best” mortgage rate.
The right structure depends on:
- Your income
- Your risk tolerance
- Your future plans
- How much certainty you need to sleep at night
Understanding your options before choosing makes a significant difference — not just financially, but emotionally.
Disclaimer: This information is general in nature and does not take into account your personal financial situation, needs, or objectives. Personalised advice should be sought before making any financial decisions.
