Mortgage Options in 2025 New Zealand: What You Need to Know.
- Rhys Trueman
- Jul 30
- 3 min read
Whether you're a first-home buyer, investor, or upgrading to your forever home, choosing the right mortgage structure can make a significant difference to your financial future.
With rising interest rates, new lending rules, and more competitive products hitting the market, understanding your mortgage options in 2025 is more important than ever.
Here’s a breakdown of the most common home loan types available in New Zealand and how to decide which one’s right for you.
Fixed-rate mortgages
What it is: A fixed-rate mortgage locks in your interest rate for a set period (commonly 1–5 years), meaning your repayments stay the same regardless of market changes.
Why it works:
Predictable repayments help with budgeting
Protection from interest rate increases
Peace of mind for short-to-medium term planning
Things to consider:
You’ll miss out if interest rates drop
Break fees apply if you repay early, sell, or refinance before the term ends
Less flexibility with lump sum payments
Best for: Buyers who value stability and want to avoid surprises in a volatile market.
Floating (variable) rate mortgages
What it is: A floating loan’s interest rate can go up or down in line with market rates so your repayments can change at any time.
Why it works:
You can make extra repayments at any time
No break fees if you refinance or sell
Good if you expect rates to drop or plan to pay the loan off faster
Things to consider:
Repayments can increase unexpectedly
Less predictability compared to a fixed term
Best for: Buyers wanting maximum flexibility, or those expecting to repay or refinance in the short term.
Interest-only loans
What it is: For a set period (usually up to 5 years), you only pay interest on the loan no principal. After that, payments switch to full principal + interest.
Why it works:
Lower repayments during the interest-only period
Frees up cash for renovations, investments, or other financial goals
Popular with investors maximising rental returns
Things to consider:
You’re not building equity during the interest-only period
Total interest paid over the life of the loan will be higher
Stricter approval criteria from lenders
Best for: Investors or buyers with short-term cash flow needs, provided there’s a clear long-term plan.
Split loans (part fixed / part floating)
What it is: You divide your mortgage into portions—some on a fixed rate, some on floating.
Why it works:
Balances stability with flexibility
Lets you hedge against interest rate changes
Allows partial lump sum payments without penalties
Things to consider:
Slightly more complex to manage
Floating portion still carries risk if rates rise quickly
Best for: Buyers wanting the best of both worlds predictable repayments with room
to adjust if needed.
Government-backed loans (Kāinga Ora First Home Loan)
What it is: A low-deposit home loan backed by Kāinga Ora, designed to help first-home buyers get into the market sooner.
Why it works:
Only 5% deposit required (subject to conditions)
Available through select lenders
Works with First Home Grant eligibility
Things to consider:
Income and house price caps apply
You must live in the home (not for investment)
Standard lending criteria still apply
Best for: First-home buyers who meet the eligibility criteria and are struggling to reach a 20% deposit.
Which mortgage option is right for you?
Choosing the right structure depends on your:
Income stability
Future plans (e.g. moving, renovating, investing)
Risk tolerance
Deposit size
Whether you're buying to live in or invest
There’s no one-size-fits-all answer. In many cases, a combination of loan types can offer the best mix of certainty and flexibility.
Final thoughts
The mortgage market in 2025 is more dynamic than ever with new lending products, changing interest rate trends, and ongoing policy updates shaping how Kiwis borrow. Taking the time to understand your options and talking to a mortgage adviser or lender you trust can save you thousands over the life of your loan.
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