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3 year fixed rate home loans

How to find a three year fixed rate home loan that suits you.


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Fixing a home loan for three years means you’ll be able to rest easy with the knowledge that your mortgage rate and repayments will not creep up during the three year term.

No matter what external economic factors are occurring or what happens with the RBNZ’s OCR decision, a three year fixed rate mortgage won’t give you any repayment surprises.

As with any financial product, there are some drawbacks to a fixed home loan, including lack of flexibility and early repayment fees or break costs if you repay your loan before the fixed period ends.

What’s a three year fixed rate mortgage?

As the name implies, this is a home loan which has a rate fixed for three years. Most banks and lenders across New Zealand will offer a three year fixed rate home loan. This is because it’s a great mix of security and length: three years is long enough to reap the benefits of a competitive rate, but short enough to give you the flexibility to change loans if you find that a fixed rate isn’t for you.

Once the three year period ends, two things can happen. Firstly, your loan could revert to the standard floating rate offered by your lender unless you choose otherwise, or secondly, your lender may approach you to fix an interest rate for another term.

In most cases, your lender will notify you when your fixed period is close to ending so you can make a decision. If they don’t, ensure you set a calendar reminder well before the fixed rate ends so you can decide on what you’re going to do.

How does a three year fixed rate mortgage work?

If the rates go down, those with floating rate mortgages could see their repayments go down too; however, if rates go up, floating rate borrowers could be paying more.

A fixed rate home loan protects borrowers against rising rates. You lock in a rate with your lender, and then for the duration of that term, your rate stays the same.

Unfortunately, a side effect of this is that a fixed rate home loan is less flexible and has extra fees compared to its floating rate cousin.

Fixed rate home loans can come with expensive break fees if you decide to leave the loan early.

They’ll also usually be missing features like 100% offset accounts. If they allow you to make additional repayments these will usually be capped off at somewhere between $10,000 – $30,000 a year, rather than unlimited like most variable rate home loans.

What types of three-year fixed rate home loans are available?

Just like regular floating rate loans, fixed rate home loans come in a range of different types, with these types aimed at different borrowers. It’s important to note too, that three year fixed rate home loans also come in low doc variants to suit those who are self employed, as well as bad credit variants.

Keep in mind that these two types of fixed rate home loans might come with higher fees or rates, so ensure you carry out a comparison before applying.

No frills home loan

These are also known as basic home loans, and offer minimal features, meaning you may not be able to enjoy an offset account, redraw facility or extensive access options. Because of this, the lender is able to offer lower rates, and in some cases, lower fees.

Package home loan

Package home loans involve you moving all of your banking over to your lender. This means your credit cards, insurance, savings accounts and transaction accounts. In return for doing this you may receive fee waivers on your home loan and credit card, discounts off your premium and bonus interest on your savings accounts. You also generally receive a discounted fixed rate. One of the negatives of this type of loan is that you’ll usually have to pay an annual fee.

Full-featured home loan

This type of loan sits between no frills and package home loans. It’s usually offered with a range of features such as offset accounts and the ability to make additional repayments. It also comes with a range of fees such as application, settlement, legal and valuation fees. Keep in mind, though, that many fixed rate home loans lack these features.

How to compare three year fixed rate home loans

A three year fixed rate home loan can be compared using the same factors as a regular home loan, but there are a few additional points to consider.

  • Rate. The interest rate isn’t always the most important indication of whether or not a home loan is the best choice for you, but it will have a large bearing on how expensive your repayments will be. Make sure you understand how interest is calculated before you commit. Also, keep in mind that the advertised interest rate will not take fees into account, so take a look at the comparison rate too.
  • Ability to make additional repayments. This won’t be important for all borrowers, but keep in mind that not all fixed rate home loans will allow you to make additional repayments. The ones that do may come with an annual limit, so if you think you’ll be making additional repayments during the year, ensure that your loan will allow you to.
  • Fees. Compare the establishment, valuation, legal and other upfront costs when comparing three year fixed rate home loans. If the loan you’re interested in applying for is a package home loan these are generally waived and an annual fee is charged, so it’s worth looking into this.
  • Other features. These may be important depending on what you plan to do with your home loan. These include interest-only repayment options, and the maximum length of the interest-only period; offset accounts and whether they’re 100% or partial offset accounts; and what repayment options the lender will give you.

Pros and cons of a three-year fixed rate home loan


  • Consistent repayments– With a three-year fixed rate mortgage, you can benefit from the security of having consistent repayments, which means you don’t have to worry about interest rate rises.
  • Additional repayments – Many fixed rate home loans today still allow you to make extra payments, although these may be limited to amounts between $10,000 – $30,000 a year.
  • Loan term– Even if you decide that fixed rate home loans aren’t for you, or rates are cut significantly, in three years you’ll be able to change your rate to a flaoting rate, or a different fixed rate option which means you aren’t locked in for an extended period of time.


  • Interest rate drop – If lenders start dropping interest rates, your rate will stay the same, meaning you won’t be able to benefit from making lower repayments.
  • Discharge fees – Unlike other home loans in New Zealand, fixed rate home loans still charge discharge fees. These can be quite expensive depending on a number of factors.


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