If you’ve recently read our article on refixing vs refinancing, you might be wondering: “Okay, but what are my actual options?” It’s a great question — and one we get asked a lot.
Most people know interest rates matter. But the structure of your home loan can have just as much impact on your flexibility, your cash flow, and your long-term financial position. Sometimes more.
In New Zealand, there are four main home loan products to understand: Fixed Rate, Floating (Standard Variable), Revolving Credit, and Offset Mortgages. Here’s what each one actually means — and who each one suits.
Fixed Rate Home Loans
What is a fixed rate home loan?
A fixed rate home loan locks in your interest rate for an agreed period (typically 6 months, 1 year, 18 months, 2, 3, 4, or 5 years). A handful of lenders have offered longer terms like 7 or 10 years in the past, but these are rare in the current market.
During the fixed term, your rate won’t change – regardless of what happens to the Official Cash Rate (OCR) or what other lenders are doing.
How does it work in practice?
Here’s a simple example:
$500,000 loan | 30-year term | 2-year fixed at 5.00% (Principal & Interest) Weekly repayments: approximately $620 — consistent for the full two years. At the end of the fixed term, you’ll be offered new rate options and can choose a new structure.
Your rate is locked. Your repayments don’t move. What you budget for in January is what you’re still paying in December.
Extra repayments are sometimes available during a fixed term, but rules vary by lender. Breaking a fixed rate early (for example, if you sell your property or want to switch lenders) can result in break costs, which are calculated based on current rates, your loan balance, and how long remains on your fixed term.
Who typically suits fixed rate lending?
- Homeowners who want certainty and consistency
- Families managing a set household budget
- Borrowers who want protection if interest rates rise during their term
One thing I hear a lot is: “Which fixed rate should I choose?” And honestly, if I had a crystal ball, I’d be doing something else for a living.
Timing the market is genuinely hard. There are so many variables — global economics, inflation, the OCR, bank funding costs — and even the economists don’t always get it right. What I can say is that the decision shouldn’t just be about which rate looks best today. It should be about your full financial picture: your income stability, whether you might sell or refinance, and how much certainty you need day-to-day.
Top tip
One strategy worth asking your adviser about? Splitting your lending across multiple fixed terms. Rather than putting your whole loan on one rate, you can split it — say, half on a 1-year and half on a 2-year — to reduce your exposure if rates move up.
Floating (Standard Variable) Home Loans
What is a floating rate home loan?
A floating rate home loan has no fixed period. Your interest rate can move up or down at any time — usually in response to OCR changes or lender decisions in New Zealand. Floating rates are almost always higher than current fixed rates (that premium is essentially what you pay for flexibility).
How does it work?
There’s no lock-in and no fixed commitment. You can make additional repayments at any time, usually without penalty. If you sell your property, switch lenders, or pay off a lump sum, there are generally no break costs.
The trade-off is that your repayments can change. If your lender increases their floating rate, your payments go up. If they decrease, they go down.
Who typically suits floating rate lending?
- Borrowers expecting a change in circumstances in the near future (sale, inheritance, business payout)
- Those who want full flexibility to make lump sum repayments
- Short-term holding strategies where certainty isn’t the priority
Revolving Credit Facilities
What is a revolving credit facility?
A revolving credit facility works like a large overdraft, but it’s secured against your home. Think of it like a transactional bank account where the balance is your mortgage.
How does it work?
Every dollar sitting in the account reduces the loan balance you’re being charged interest on. So if your facility limit is $400,000 and you have $50,000 sitting in the account, you’re only paying interest on $350,000.
Many clients use their revolving credit as their everyday account — salary goes in, bills go out. The more money you keep in the account between expenses, the less interest you pay.
Interest is calculated daily and charged monthly by most lenders.
Revolving credit variations
- Non-reducing facility: The limit stays the same for the life of the loan.
- Reducing facility: The limit reduces over time (e.g., over a 30-year term), meaning your available credit decreases as the years go on.
Who typically suits revolving credit?
- Borrowers with irregular income – self-employed clients, commission earners, or those with significant bonuses or overtime
- People who are disciplined cash flow managers and comfortable actively monitoring their account
- Those who want to maximise interest savings without the structure of a term loan
The honest word on revolving credit
It’s a powerful product when used well. The keyword there is used well. If the available funds are easy to access and easy to spend, the interest savings can disappear quickly. This product rewards discipline — it’s not ideal for every household, and that’s not a judgment, it’s just reality. Your adviser can help you work out whether your financial habits are a good fit.
Offset Mortgages
What is an offset mortgage?
An offset mortgage links one or more savings accounts to your mortgage. The balance in those accounts offsets the mortgage balance you’re charged interest on and your funds remain accessible and sit in a separate account.
How does it work?
Here’s a simple example:
$400,000 mortgage | $40,000 in offset savings account Interest is charged on $360,000 — not the full $400,000. Your $40,000 savings remain yours to access at any time.
Unlike a revolving credit facility, your mortgage and bank accounts remain separate. The offset is calculated behind the scenes. You can see and access your money, but they’re working to reduce your interest at the same time.
Offset mortgage variations
- Single or multiple offset accounts
- Some lenders allow family-linked accounts (e.g., a parent’s savings offsetting an adult child’s mortgage)
- Interest-only options are available with some lenders, subject to approval
Who typically suits an offset mortgage?
- Borrowers who hold meaningful savings balances and want to put them to work
- Those who want the interest-saving benefit of a revolving credit without actively managing a combined account
- Clients holding emergency funds or saving toward a specific goal
An important consideration
Not all lenders offer offset mortgages, and of those that do, not all will allow the mortgage to be held in a trust or company structure. If your accountant or solicitor has recommended a particular ownership structure, check with your adviser before assuming an offset product will be available to you.
Which product is best?
The honest answer: there’s no single “best” mortgage product.
The right structure depends on your goals, your cash flow, your future plans, how much flexibility you need, and what your chosen lender actually offers. Many homeowners end up with a combination — for example, a fixed rate loan for the bulk of their lending, with a revolving credit or floating portion for flexibility.
That’s the whole point of a mortgage structure review. It’s not just about chasing the lowest rate — it’s about making sure your lending is actually set up in a way that works for your life.
At The Mortgage Supply Co, that’s our specialty. We’re not tied to one lender or one product. We’re focused on matching you to the right structure for where you are right now — and where you’re heading.
Not sure where to start?
If your fixed rate is coming up for refix, your circumstances have changed, or you’ve never had a proper mortgage structure conversation, now’s a good time.
Get in touch with our team — we’re happy to have a no-obligation chat about what might work best for you.
