Should I fix or float my mortgage in 2026?

Where the OCR actually is right now

The Official Cash Rate is set by the Reserve Bank of New Zealand (RBNZ) seven times a year. The OCR is the wholesale rate at which commercial banks borrow overnight from RBNZ, and it is the foundation that variable mortgage rates sit on top of. Fixed mortgage rates are influenced by the OCR but are priced off the swap curve, which we cover in a separate piece.

As at the date of this article, the OCR sits in the mid-5% range. RBNZ's own monetary policy statements have signalled a slow, data-dependent easing path, but they have also been explicit that further moves depend on inflation, employment and global rate settings (RBNZ Monetary Policy). Translation: nobody, including RBNZ, knows exactly what the OCR will be in November.

What matters for your mortgage is not where the OCR is today. It is what the market believes about where it will go, because that belief is already baked into the rates banks are quoting you for 1, 2 and 3-year fixed terms.

The textbook rule, and why it's incomplete

The textbook rule says: fix when rates are falling, float when they're rising. The logic is intuitive. If rates are headed down, locking in stops being attractive, so you float to capture the falls. If rates are headed up, locking in protects you, so you fix.

The rule is incomplete because it ignores three things:

1. Forward expectations are already priced in. If the market expects three cuts, banks discount their 2-year fix to reflect that. You don't get the cuts twice.
2. Float rates in NZ are not the bargain they look like. Most banks price floating rates well above their 1 and 2-year fixed cards, often by 100 to 200 basis points. That gap is the cost of optionality.
3. Households are not arbitrageurs. If your mortgage repayment increases by $400 a month and that breaks your budget, "saving" $1,500 over the year by being right about the OCR doesn't help you.

What the four real choices cost

For a $700,000 mortgage on a 30-year term, the back-of-envelope difference between these structures (using illustrative carded rates only, your actual quote will differ):

• Float at ~7.0%: repayments around $4,660/month. Highest cost, full flexibility, no break costs.
• 1-year fixed at ~5.6%: repayments around $4,020/month. Saves you ~$640/month vs floating for 12 months, then you refix into whatever the market is doing in 12 months.
• 2-year fixed at ~5.8%: repayments around $4,110/month. Locks in for 24 months, slightly worse for the first year, potentially better for the second.
• 3-year fixed at ~6.0%: repayments around $4,200/month. Maximum certainty, you commit further into the unknown.

These are indicative carded rates only and assume principal-and-interest. Actual rates available to you depend on LVR, lender, and the negotiation we do on your behalf. The point is the shape: short fixes are cheap right now relative to floating, and long fixes are roughly the same as short ones because the swap curve is relatively flat.

How to actually decide

Step one: figure out your buffer.

What's the largest repayment increase you could absorb without it being a problem? Not "without losing the house". Without it making the household tense. If that number is $300/month, your tolerance for floating is limited. If it's $1,500/month, you have a lot of room.

Step two: figure out your view.

You don't need a confident forecast. You need a directional view. "Rates probably keep falling slowly" is fine. "Rates probably hold here" is fine. "Rates could go either way" is fine. What you do with each of those views is different.

Step three: pick a structure that fits both.

If you have a strong directional view and high buffer, you can express the view in your structure. Most people have one or the other, not both. For those people, a split is almost always the right answer. Half of your mortgage on a 1-year fix, half on a 2-year fix, gives you two repricing dates instead of one, smooths repayment shock, and forces you to engage with the decision twice a year instead of locking and forgetting.

What we'd do for three example households

Household A: First-home buyer, two incomes, tight budget, no buffer. Fix 100% for 18 to 24 months. Pay for certainty. The opportunity cost of being wrong is small relative to the value of knowing what next year's repayment looks like.

Household B: Mid-mortgage couple, comfortable buffer, expects rates to fall further. Split. 60% on a 1-year fix, 40% floating with a revolving credit. Captures further cuts on the floating portion, retains certainty on the bulk.

Household C: Late-mortgage household, mostly principal at this point, retirement in the picture. Whatever they prefer psychologically. Their mortgage is small enough that rate decisions don't materially change their financial position. Pick the option that means they don't think about it.

What we do not do

We don't make rate predictions in client conversations. We tell people the OCR path RBNZ has signalled, what the swap market is pricing, what the banks are quoting, and what the consequence of each choice is. The household makes the call, not us. (For our take inside two hours of every OCR decision, see the Insights feed.)

We also don't recommend a structure based on what saves the firm time. Splits are more work to manage than single fixes. That is sometimes the right answer anyway.