Fixed and floating interest rates
Whether you should choose a fixed or floating interest rate depends on several factors. If you value predictable repayments, a fixed interest rate may be the right choice. If you need greater flexibility, a floating interest rate may be more suitable.
A loan with a floating interest rate follows changes in market interest rates. With a fixed interest rate, your rate is locked in for an agreed period. Below you can compare the advantages and disadvantages of fixed and floating interest rates and see what each option means for you as a customer.
Floating interest rate
A floating interest rate changes in line with general market interest rates. The rate may be updated every other month. If the interest rate increases, the Housing Bank will normally notify customers around six weeks before the change takes effect.
Advantages of a floating interest rate:
- You benefit from lower interest rates if market rates fall
- You have greater flexibility to change your loan terms
- You can switch from a floating to a fixed interest rate at any time.
Disadvantages of a floating interest rate:
- Your interest costs increase when interest rates rise
- It is more difficult to predict your future interest costs.
Fixed interest rate
We offer fixed interest rate agreements for periods of 3, 5, 10 or 20 years. The fixed-rate period cannot be longer than the remaining term of your loan. For example, if your loan has 15 years remaining, you cannot choose a 20-year fixed interest rate agreement.
You can choose to fix the interest rate on all or part of your loan.
Advantages of a fixed interest rate:
- You know exactly what your interest costs will be throughout the fixed-rate period
- Your loan is not affected if market interest rates increase
Disadvantages of a fixed interest rate:
- If market interest rates fall, you will continue to pay the higher fixed rate until the end of the fixed-rate period
- There is limited flexibility to change your loan terms
- If you end your fixed interest rate agreement early, you may have to pay breakage costs
Would you like to change the interest rate agreement on your loan?
If you have a fixed interest rate and would like to switch to a floating interest rate, you can choose to terminate your fixed interest rate agreement.
If you have a floating interest rate and would like to fix your rate, you can apply for a fixed interest rate agreement.
In My Customer Account, you can see the interest rate that applies to your Housing Bank loan.
You can also view the Housing Bank's current interest rates.