What actually sets your mortgage rate
Your bank doesn't pick your interest rate out of thin air. It starts with the Reserve Bank of New Zealand's Official Cash Rate (OCR), which sets the floor for how much it costs banks to borrow money short-term. From there, banks look at wholesale swap rates (what it costs them to lock in funding for one, two, three or five years — which is why fixed rates for different terms move independently of each other) and add their own margin, funding costs and competitive positioning. That's why two banks can offer noticeably different two-year rates even on the same day.
Your personal rate is then adjusted by your loan-to-value ratio (LVR), the size of your loan, whether you go through a mortgage adviser (who can often access rates slightly sharper than what's advertised online), and whether the bank is actively trying to win new customers that quarter.
Where rates are right now
- OCR
- 2.75%
- Last OCR decision
- 2 September 2026
- Next OCR review
- 28 October 2026
- Last reviewed
- 2 September 2026
Source: Reserve Bank of New Zealand
The OCR sets the floor for what it costs banks to borrow short-term, but fixed rates for each term also move with wholesale swap rates between OCR decisions. The rates in the MyRateCheck can shift even in a week when the OCR doesn't change. Always check the calculator for today's figures against your own loan.
Fixed vs floating: The actual trade-off
| Fixed rate | Floating rate |
|---|---|
| Locked in for the term you choose. Your repayment doesn't move | Moves whenever your bank changes its floating rate, sometimes with little notice |
| Breaking early can trigger a break fee if rates have fallen since you fixed | No break fee. You can repay extra or switch lenders freely |
| Usually the lower rate of the two | Usually the higher rate, used mainly short-term (e.g. while selling, or split-loan flexibility) |
Most Kiwi borrowers fix the bulk of their loan and keep a small floating or revolving-credit, offset portion for flexibility (extra repayments, an emergency buffer, or an upcoming sale).
How to choose a fixed term
There's no universally "right" term. It depends on your appetite for risk and your plans for the next few years. A few rules of thumb:
- Short terms (6–12 months) suit borrowers who expect rates to fall soon, or who plan to sell, restructure, or move banks within the next year. You carry the risk of refixing into a higher rate if the market moves against you.
- Mid terms (18 months–2 years) are the most commonly chosen in New Zealand, a reasonable balance between rate and certainty.
- Longer terms (3–5 years) suit borrowers who value budget certainty above all else, especially in a rising-rate environment like the current one. The trade-off is a larger break fee if your circumstances change and you need to exit early.
- Splitting your loan across two or three different terms is a common way to hedge. You're never re-fixing your entire mortgage at once into whatever the market happens to be doing that week.
What to do next
Rather than guessing where rates are headed, the simplest move is to check what today's best available rate for your term would actually save you against what you're paying now — including what happens if you apply a cashback offer against your principal. That's exactly what the MyRateCheck calculator does in about two minutes, for free.
Related reading: how mortgage cashback works, the real cost of refinancing, or browse the FAQ.