How long should I fix my mortgage for?
Every mortgage in New Zealand comes off its fixed term eventually, and the same question arrives with it. Six months, one year, two, three, five? Fix it all, or split it?
Nobody can tell you where rates are going. What you can do is understand exactly what you're choosing between, and look at what's actually happened to New Zealand borrowers who faced the same choice over the last twenty years.
These calculators do both.
The question isn't which rate is lowest today
It's easy to look at the rate sheet, spot the lowest number, and take it. But that number only tells you what you'll pay for the length of that term. What matters is what you pay over the whole time you hold the mortgage.
Say you're choosing between a one-year rate and a two-year rate, and the one-year is lower. Taking the one-year only works out better if, when it rolls off in twelve months, you can refix at something reasonable. If rates have climbed by then, the two-year would have been the better call — even though it looked worse on the day.
So the real question is: how far would rates need to move for the other option to have been better? That's a number you can actually work out, and it turns a guess into a decision you can reason about.
If the one-year needs rates to stay below something you consider very unlikely, that tells you something. If it only needs rates to hold roughly where they are, that tells you something else.
Why "what worked before" isn't a strategy
Here's the catch, and it's the reason this page has five calculators rather than one.
When you started matters enormously. Someone who began fixing one-year terms in 2005 paid a very different average than someone who started in 2011 — same strategy, different luck.
That's why the historical calculator also runs 10,000 simulations using the actual rate data, rather than just showing you what happened once. It reshuffles history to produce thousands of possible paths, so you can see the range of outcomes a strategy produces — not just the one that happened to occur.
It'll also tell you the probability of being able to refix below 5%, 6% and 7%, which is usually more useful than an average.
What the history actually shows
Our historical data covers standard New Zealand mortgage rates monthly from late 2004.
Looking at every period of ten years or more since 2006, the one-year rate has been the cheapest available option on any given month more than 60% of the time.
That's a striking number, and it's worth sitting with. It suggests borrowers who routinely fixed short did better than those who locked in long — which runs against the instinct to grab certainty when rates look low.
Should I float and wait?
When rates are falling, there's a temptation to sit on floating for a few months and fix once they've dropped further.
Two things to weigh. Floating rates are typically well above fixed, so you pay for the wait. And by delaying, you also shift when you next come off term — which in a falling market means refixing later, and possibly at a better rate again.
The delay-to-fix calculator tells you how far the fixed rate would need to fall to break even on the wait.
Splitting the mortgage across terms
You don't have to choose one term. Plenty of borrowers split the loan — some on one year, some on two or three — so that only part of the mortgage reprices at any time.
That won't get you the lowest possible rate. What it does is reduce the damage if your whole loan rolls off in a bad month. It's the mortgage equivalent of not timing the market.
If you do split, working out what you're really paying across the whole loan takes a blended rate calculation rather than an average — the loan sizes have to be weighted.
What the numbers can't tell you
Break fees. If your circumstances change and you need out of a long fixed term, that can cost real money. Longer terms mean more exposure to that.
Cashbacks and clawbacks. A bank cashback usually comes with a period you have to stay put, and leaving early means paying it back.
Lump sum payments. Most banks limit how much extra you can pay on a fixed loan without a fee. If you're expecting a bonus or an inheritance, a shorter term or a split gives you more room.
What you can live with. Some people genuinely sleep better knowing the payment for three years. That's a real consideration, not a soft one.
The calculators
Mortgage rate required when choosing between two or more terms — enter the terms and rates you're weighing up, and see how far rates would need to move for each option to come out ahead. This is the one that turns the decision into a number.
Which mortgage term has been best — runs your loan through every fixing strategy across the historical data, plus 10,000 simulations. Shows total interest paid, principal paid and balance remaining for each approach.
Historical mortgage rates — every monthly rate from late 2004 for floating, 6 month, 1, 2, 3, 4 and 5 year terms. Includes averages, historical highs and lows, so you can see where today sits against the past.
Delay to fix calculator — how far rates need to fall to make waiting on floating worthwhile.
Blended interest rate calculator — if you split the loan, what you're actually paying overall.
For personalised advice on the best way to take advantage of your housing asset(s) as part of your financial plan, then get in touch for a no obligations chat to see how we may be able to add value for you.
If you are interested in some of my musings on fixing mortgages and historical data, then check them out below: