May 2026

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As we head into the winter months, it’s fair to say things feel a little gloomy and that is not just the weather.

Trying to pick where interest rates are heading over the next year or so comes with a fair bit of uncertainty. But even with that in mind, when it’s time to structure new lending or refix a home loan, you still need to make a decision.

So, with that disclaimer in place, let’s have a go!

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What do we know right now?

• Inflation is rising (thanks to "you know who")…
  → This generally leads to a higher OCR, and therefore higher home loan rates.
• Economic growth and recovery remain slow and have taken a hit.
  → This would normally point towards a stable or even lower OCR, and potentially more stable or lower rates.
• Wholesale rates (what banks pay for at least some of the money they lend) have increased by around 1% since November last year, and about 0.5% since the end of February.
  → This tends to push home loan rates higher across all terms (1–5 years).
• The OCR is currently sitting at 2.25%, with Reserve Bank commentary suggesting it may stay there until later this year (subject to ongoing economic data).
  → This could lead to higher home loan rates later in the year—or sooner if banks “price this in” ahead of time.
• Most banks are currently offering:
  • ~4.6% for 1 year
  • ~5.1% for 2 years
  • ~5.4% for 3 years

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So… what should you do?

Unsurprisingly, the answer is: it depends. What’s right for you won’t necessarily be the same as the next person.

That said, there’s a simple comparison we often use that can help put things into perspective when choosing between fixed terms.

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A simple example

If:

• the 1-year rate is 4.6%, and
• the 2-year rate is 5.1%

You would be better off taking the 1-year rate (and then refixing for another year) if, in a year’s time, the new 1-year rate is less than 5.6%.

Put simply:

• 4.6% (Year 1) + 5.6% (Year 2) ≈ 5.1% over two years

So the key question becomes:
Do you think the 1-year rate will rise from 4.6% to 5.6% in the next 12 months?

• If you think no, the 1-year rate may be the better option
• If you think yes, the 2-year rate could give you better certainty and value

You can apply this same thinking to other term comparisons—although the maths gets a little less tidy!

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So what’s my view?

If you asked me, I’d say that kind of increase over 12 months feels like a reasonably big jump—but it’s definitely not impossible.

• If you can afford to be wrong, you might lean towards a shorter term (like 1 year)
• If you want more certainty, you may choose to lock in a longer term, even if it costs slightly more now—particularly if it protects you in year two

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Other things to consider

Interest rates are only part of the picture. You also want to think about:

• Is your personal or financial situation likely to change soon?
• Will you have more or less disposable income?
• Do you have cash reserves or an emergency fund?
• Are you planning to sell your home?
• Will you need to borrow more?
• Do you have other loans coming up for review?
• Do you want to take advantage of cash contributions from banks?
• What’s your overall debt reduction strategy?

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Need a hand?

Somewhere in all of this is a strategy that will work well for you.

The mortgage advisers at Velocity are here to help you work through your options in a way that makes sense for your situation.

So don’t hesitate, get in touch before making any decisions about your home loan structure.

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‍Looking for Mortgage Advice?

Book a 15 -minute call with our team to find out how we can help you with your mortgage strategy.

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Brendon.

‍Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No financial decision should be taken based on the information in this blog alone. Please see our disclosure statement on our website.

About Brendon:

Hi, I'm Brendon, one of the owners and advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for around 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice, I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.

Always get professional advice

The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation.  As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures:

 https://www.velocityfinancial.co.nz/disclosure-statement.

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