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Introduction: Why Mortgage Strategy Matters

This article is brought to you by the word UNLESS.

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It offers general advice (not personalised financial advice) and includes several caveats—hence the emphasis on “unless.”

There is no universally “best” mortgage option. Every strategy has pros and cons, and getting advice that helps weigh these is sensible.

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Interest Rate Outlook: Will NZ Mortgage Rates Drop?

While I’m not an economist (I do hold a Postgrad Diploma in Finance), I believe New Zealand mortgage rates are likely to drop slightly through the rest of 2025 and into 2026.

Key indicators suggesting a rate drop:

• Wholesale interest rates (1–10 years) are trending downward.
• The NZ economic recovery is slow.
• Inflation is within the Reserve Bank’s target band.
• US economic data shows low growth and employment, increasing speculation about rate cuts.
• Major NZ economists predict the Official Cash Rate (OCR) will be cut at least once more this year.

 Note: No one is predicting a return to 2–3% mortgage rates anytime soon.

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Risk Factors: What Could Push Rates Up?

• International tariff-driven inflation could influence interest rates.
• This is especially relevant if you're considering floating rates or short-term fixed options.

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Mortgage Strategy: Fixed vs Floating in 2025–2026

Fixing for 1 Year: A Common Strategy

Fixing for one year is likely the most common approach - UNLESS:

• You are highly risk-averse and prefer certainty over potential savings.
• You plan to sell your house, switch banks, receive a lump sum, or restructure your loan within the next year.

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Why Not Fix for 6 Months?

The 6-month fixed rate is currently about 0.27% higher than the 1-year rate.
To outperform the 1-year rate, the 6-month rate would need to drop from 4.99% to 4.45%—a significant change in a short time.

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Refixing Your Mortgage: What to Do When Rates Drop

When rates drop, consider keeping your regular loan payments the same.
This helps you pay off your mortgage faster and save on interest over time.

Exceptions (UNLESS):

• Your current payments are causing cash flow strain.
• You need funds for a project and want to save the difference.
• You want to build a loan buffer for emergencies.

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Final Thoughts: Mortgage Relief Is Coming (For Most)

Most NZ mortgage holders will see some relief soon.  UNLESS you’re rolling off a 2.99% 5-year fixed loan—sorry, no good news there.

Your mortgage strategy can make a big difference in the years ahead. Refixing isn’t just about clicking a button—it’s about understanding the market, your options, and your financial goals. If you’re unsure, seek tailored financial advice.

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Mā te wā – I'll be back in February!

This is my last Fixed vs Floating blog until February/March 2026. I’m heading off on the Te Araroa Trail, a solo adventure I’ve been planning for a decade.
You can read more about my Te Araroa plans here.

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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 investment 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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