New data shows the share of floating rate mortgages in fresh lending has fallen sharply from its 2025 peak, as rising fixed rates change the calculus for borrowers.
New mortgage lending data shows the popularity of floating rate home loans has fallen significantly from its late-2025 peak, as rising fixed rates alter the economics that once made variable borrowing attractive, according to interest.co.nz.
According to the Reserve Bank, $8.475 billion in new residential mortgages were issued in May 2026. Of that, $1.541 billion — 18.2 percent — were floating rate loans. The remaining $6.934 billion, or 81.8 percent, were issued on fixed rates.
That represents a sharp drop from November 2025, when floating rate mortgages accounted for 49.4 percent of monthly new lending — their highest share over the past five years. Since then, the proportion has been on a roughly steady downward trajectory.
Why the shift happened
Between November 2023 and November 2025, the average two-year fixed rate offered by major banks fell from 7.04 percent to 4.49 percent. Many borrowers stayed on floating rates in the expectation that fixed rates would continue falling, allowing them to lock in an even lower rate a few months later.
That expectation has reversed. By June 2026, the average two-year fixed rate had risen to 5.26 percent. Markets are pricing further OCR increases through the rest of 2026 and into 2027. The incentive to remain floating — betting on a future rate drop to lock in cheaper fixed funding — has largely disappeared.
What the RBNZ's latest move changed
The Reserve Bank's July 2026 OCR increase of 25 basis points pushed up floating rates across the major banks, with the increase passed on in full to borrowers. The impact on any individual household depends on their loan size, but at face value the effect is moderate: an extra 0.25 percent on a $500,000 mortgage adds roughly $24 per week in interest costs.
However, the RBNZ data shows floating rate borrowers represent a relatively small portion of total outstanding mortgage debt. Of the $399.9 billion in total residential mortgages outstanding at the end of May, just $40.7 billion — 10.2 percent — was on floating rates. The remaining $359.2 billion was already fixed, meaning those borrowers are insulated from the immediate OCR pass-through.
Behavioural signal
Analysts note the most significant impact of the latest OCR increase may be psychological rather than financial. The RBNZ's continued upward movement reinforces the idea of a rising rate cycle in borrowers' minds, likely increasing caution about taking on new debt and adding further downward pressure to an already subdued housing market.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.