Mortgage Structure Update Q2 2025

Time for us to give an update on Mortgage Structure.

With economic signals shifting and interest rates hanging in the balance, the current climate calls for a strategy that acknowledges there is a high level of uncertainty. Here’s our take on what’s driving the market and how you can position yourself smartly.

New Zealand’s inflation has been cooling off, which has nudged interest rates down a bit lately—wholesale rates have softened, and retail mortgage rates are following, albeit slowly. Meanwhile global uncertainties such as Trump Tariffs could prove to be deflationary if the economy cools, or they could be inflationary with prices of goods increasing. With so much uncertainty the direction of interest rates is a coin toss.

A Smart Approach: Split Your Mortgage, Spread the Risk

Given this uncertainty—rates could rise with inflation or dip if global pressures ease—it is hard to go all in on one fixed term with high conviction that this is the correct strategy. That’s why splitting your mortgage makes sense. By staggering your fixed terms (say, part on a 1-year and part on a 2-year), you avoid having everything come due at once. It’s a practical way to hedge your bets: you lock in some stability now while keeping flexibility to catch lower rates if they drop later. In times like these, when the outlook’s murky, spreading the risk is the most rational approach we can take.

That said, the 2-year fix is the most popular choice with our clients after rates offered have dipped below 5%. The 2 year is offering a middle ground that’s neither too short nor too long. It’s long enough to shield you from a sudden rate spike but short enough to reassess if the landscape shifts by mid-2027.

Everyone’s situation is different—your cash flow, goals, and loan size all play a part. A split structure or a 2-year fix might be the starting point, but your mortgage strategy should be tailored to your needs so please reach out to discuss your personalised mortgage strategy.