What Happens When a Fixed Home Loan Ends: A Guide for New Zealanders

As a trusted mortgage broker in Tauranga, we understand the importance of making informed decisions about your home loan. In recent times, fixed-term home loans have seen a surge in popularity, particularly during the Covid pandemic, as many lenders offered fixed mortgage rates below 2%. However, what happens when these fixed terms expire? This guide will help you understand the process and your options, particularly if you are a first home buyer in New Zealand.

Understanding Fixed Rate Home Loans

When you apply for a home loan, you can choose between a fixed rate or a variable rate home loan, or a combination of the two, known as a split loan. A fixed rate loan has the same interest rate for the duration of the fixed period, regardless of whether broader interest rates go up or down. Most fixed periods in New Zealand range from one to five years, providing some financial certainty. This differs from a variable rate, which can change as often as the official cash rate does.

What Happens When Your Fixed Rate Ends?

When your fixed term is nearing its end, your lender and mortgage broker will usually contact you to let you know what your options are. You will then have to decide whether to re-fix your loan at a new rate, switch to a variable rate, or refinance with a new lender.

  • Re-fix: If you re-fix your loan, you’ll also need to decide how long you’re fixing it for – usually between one and five years.
  • Variable: If you prefer the variable rates on offer, you can opt to switch. A broker can often help you negotiate a lower variable rate than the ‘revert rate’ a lender will offer.
  • Refinance: If you have enough equity in your property, you may also be able to refinance with a new lender when your fixed term ends. A mortgage broker will be able to talk you through your options.

When your fixed term is nearing the end, the worst thing you can do is nothing. If you simply let the fixed term lapse, your lender will likely switch your loan to its revert rate, known as the ‘standard variable rate’, which can be much higher than some of the discounted options available to new borrowers. It’s a win for the lender but not for the borrower.

Is it a Good Time to Move to a Fixed Rate?

That depends on a borrower’s unique situation. A fixed home loan offers more certainty in a changing interest rate environment as your repaymentsremain constant throughout the fixed period, regardless of what happens to the official cash rate. However, as lenders price their fixed mortgages on what they think interest rates may do in the future, most fixed rates are currently higher than the variable options. Ultimately, whether you move to a fixed rate depends on your preferences, including how comfortable you are with risk.

Can You Extend Your Fixed Rate Term?

No. When a fixed rate term ends the borrower has the option to re-fix, but this is for a new fixed term and will likely have a different interest rate. This is because the forecast for where the cash rate is heading could have changed significantly since you last fixed your loan.

What Happens if Interest Rates Go Up or Down When I’m on a Fixed Rate?

The general appeal of a fixed rate is the rate of interest paid on a loan doesn’t change for a set period. That means when the lender puts its interest rates up or down, it doesn’t affect existing fixed rate customers. There are pros and cons to this:

  • Pro: If interest rates increase significantly during the fixed term period, you could find yourself financially in a better position than borrowers on variable loans.
  • Con: If interest rates go down, you still have to pay your locked-in interest rate for the duration of your fixed term.

If interest rates change in the period between when you agree to a fixed term and when your fixed term starts, that’s a more challenging scenario. If interest rates go higher than what you were approved for you’ll typically have to pay the new, higher rate. Some lenders will offer you the chance to ‘lock in’ your agreed rate for a fee. Talk with the lender or a mortgage broker to calculate whether a rate lock would be a worthwhile option.

Can I Change My Loan During My Fixed Rate Term?

Generally, making changes to your loan is more difficult when you’re on a fixed rate and you may incur financial penalties, such as a discharge fee and potentially break fees, or break costs. Sometimes the penalty can be based on a percentage of the loan, leaving the borrower tens of thousands of dollars out of pocket. But this isn’t always the case. It’s important to speak with your mortgage broker to know your options if you’re considering breaking your fixed contract in any way.


Understanding the ins and outs of fixed-rate home loans is crucial for any homeowner or potential first home buyer. As a mortgage broker in Tauranga, we are here to help you navigate these complexities and make the best decision for your financial future.

About Best Mortgages:

Tauranga’s Best Mortgages has been a trusted mortgage broker for 15 years and have helped hundreds of families reach their property goals. Our name says it all—we find the greatest mortgage solutions for our clients. We offer refinance, first home buyer, refinance, and investment property loans. We proudly serve clients across New Zealand.

Best Mortgages understands that buying a home is a major financial decision that demands careful consideration. We listen to our clients and comprehend their financial situations. We can then provide them the best financial solutions to help them become homeowners.

Our skilled mortgage brokers shop around for the best lending product for our clients. We strive to make lending easy. To ensure a stress-free experience,we guide our clients throughout. Don’t just take our word for it, check out our positive reviews from satisfied clients.

Best Mortgages can assist first-time homebuyers and seasoned investors accomplish their property ambitions. Discuss your home lending needs with us today to find the best mortgage for your situation. As a Best Mortgage broker, we assist you locate the right mortgage for your needs. Ready to get started? Contact us today.

Give the Best Mortgage brokers a call today on 021 449 177.

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