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    In May 2022, New Zealanders owed a total of $590 billion on their mortgages. That’s a lot of money at stake, and making the right decision on how you structure your mortgage can save thousands of dollars. It’s why any inkling of rising interest rates keeps homeowners in such suspense.

    Right now, inflation is high, the OCR has been raised and banks have already started to factor this change into their mortgage rates. So, what does this shift mean for the future of your home loan? If you’re going to fix it for a certain period – as lots of people tend to do – should you go long or short?

    The pros and cons of refixing for one year


    A one-year fixed rate is lower. If you get lucky when it’s time to refix the following year, you’ll be able to take advantage – without having to worry about any break fees.
    Access competitive rates. At the end of your one-year fixed-term, you have the option to refix or look for competitive rates elsewhere.
    Flexibility. You give yourself one year to further assess the market before deciding whether to lock into a longer fixed rate.
    Good for short-term homeowners. As a one-year rate is lower, it’s a good option if you’re planning on selling in the next 12 months.


    It can be riskier. After one year, you’ll need to refix but there are no promises the rate will be as low as you’re prepared for.
    Unpredictable economy. With only one year locked in, you’ll need to watch the market carefully, but this can be quite stressful and cause budget challenges.

    The pros and cons of refixing for two or more years


    Potential to save money long-term. RBNZ has said it wants to raise the OCR again by the end of 2022 and this could mean another rise in interest rates. With your rate locked in before this happens, you would save on interest.
    Ability to negotiate. For longer fixed-term rates, banks will be more competitive, and you can try to negotiate your rate.
    Easier to budget. Because your repayments will be the same for two or more years, you can plan your finances further ahead.
    Less risk. With economists predicting a recession, fixing at today’s rate for more than a year could be less risky.


    Interest rates might not go up. You could pay more on your mortgage if interest rates don’t increase.
    Additional fees. If you want to pay off a lump sum of your home loan early, there may be fees involved.
    Not so good for short-term lending. Because a two-year fixed rate is usually set slightly higher, it might not be the best option for homeowners looking to sell within the next two years.

    Do what’s right for you

    As a homeowner, you’re always looking for the best way to structure your mortgage so you pay the least amount of interest. However, interest rates are notoriously hard to predict. Add to that the current state of the global economy, and it’s like trying to decipher a mug full of tea leaves. No matter what happens with interest rates, if you’ve made a good plan with your mortgage broker, you should come out on top.

    At Global Finance, we’ll help you make the right decision for your financial future. Have a chat with the team at Global Finance today.


    **These are general guidelines and are by no means a reflection of bank or lending policies