Fixed terms surge as mortgage strategy shifts in NZ
Homeowners and investors across New Zealand are locking in one- and two-year fixed mortgage terms, reversing the short-term and floating trend seen earlier this year.
The latest data from the Reserve Bank showed borrowers are responding to the appeal of sub-5% interest rates—and uncertainty over how much lower rates may actually go.
Fixed terms back in fashion
According to the RBNZ’s C71 data series, of the $5.725 billion in new mortgages taken out by owner-occupiers in March, $1.723bn (30.1%) was fixed for one year and $1.644bn (28.7%) was fixed for two years, interest.co.nz reported.
By contrast, just 23.9% of these new mortgages were on floating terms—down sharply from 39.8% in February.
It marks a sharp turnaround in just a month, with homeowners quickly locking in the lowest available rates—most recently found in shorter-term fixes.
Shift follows sub-5% rate offers
According to interest.co.nz, it’s no coincidence that, at the time of writing, the two lowest “special” rates from the major banks—including Kiwibank—are 4.99% for both one- and two-year terms.
Borrowers appear to be capitalising on these “special” offers—suggesting many expect rates to stabilise or decline only modestly in the near term.
Now, however, there’s a clear sense that one- and two-year rates are considered attractive, and that the scope for significant further interest rate cuts may be limited—though with the current global political turbulence, there’s still a fair amount of guesswork involved in predicting what comes next, the financial news website said.
This shift aligns with a recent RBNZ report, which showed a surge in refinancing activity. Many borrowers have been switching lenders to access better fixed-rate deals—pushing mortgage activity to its highest level since 2021.
In line with this, a recent ASB report found that borrowers are becoming more deliberate in their mortgage strategy. Some are choosing to split loans between shorter and longer fixed terms to maintain flexibility, while others are locking in one- to two-year terms to balance short-term savings with the potential for further cuts.
Investors follow the same pattern
The same shift played out among residential property investors. Mortgage lending to investors rose to $2.2bn in March, up from $1.7bn in February.
- 31.1% of investor loans were fixed for one year (up from 21.7%)
- 26.5% were fixed for two years (up from 11.6%)
- Floating loans dropped to 26%, from 43%
The trends were the same.
Rate cuts signal opportunity—but limited downside expected
Borrower strategy is evolving alongside broader economic signals. While more OCR cuts are expected, the appetite for longer fixed terms suggests borrowers believe most of the easing may now be priced in.
As ASB noted, mortgage clients are now much more engaged with strategy and timing, weighing flexibility, long-term certainty, and household budgets in the current environment.
“The market’s moving, but it’s not just about chasing the lowest rate anymore,” the report said. “It’s about matching product structure with people’s real-life financial needs.”
