From 7% Squeeze to Cash Flow Relief: Property Investors Pivot to 1-Year Terms

In a clear shift of strategy, residential property investors are rushing into 1-year fixed mortgages - and the numbers back it up.

According to the latest Reserve Bank of New Zealand (RBNZ) data, $1.07 billion was lent to investors on 1-year fixed terms in June 2025, up from just $369 million in February. That’s nearly a threefold increase in just four months.

Over the same period:

• 2-year lending dropped from $594 million (March) to just $209 million (June)
• Floating rate lending, while high in May ($929m), has pulled back to $637 million
• Longer-term fixed lending (3+ years) remains minimal, despite a small uptick in June

So, what’s driving this?

The Cash Flow Comeback

After years of dealing with mortgage rates close to 7%, investors are finally seeing relief. With the Official Cash Rate (OCR) dropping from 5.5% to 3.25% since November 2024 — and another 25 basis point cut expected in August - mortgage rates have fallen.

Investors are understandably keen to improve cash flow. A 1-year fixed rate offers the lowest available pricing in most cases, and locking in a cheaper rate now gives them breathing room after two tough years of squeezed margins and rising costs.

Why Not Fix Longer?

The sharp decline in 2- and 3-year fixed lending shows that investors aren’t chasing long-term certainty - they’re choosing strategic flexibility.

Here’s why:

• More OCR cuts are expected. Fixing for two or three years could mean missing out on better rates in 2026.
• No signs of overheating. The housing market remains subdued, giving investors confidence that the Reserve Bank won’t be tightening again soon.
• Shorter terms = more agility. A 1-year fix means investors can reassess and reprice annually.

The message is clear: the 1-year fix has become the preferred tool for managing both cost and risk.

What Should Investors Consider?

The popularity of the 1-year term makes sense in the current climate - but it isn’t without risk. If rate cuts don’t continue as expected, investors may face higher re-fix rates next year. However, for most, the short-term cash flow win outweighs the long-term uncertainty.

Smart investors are:

• Reviewing their lending structure with advisers
• Considering a split-term approach to hedge bets
• Staying close to OCR updates and market commentary

Final Thought

In 2025, property investors aren’t guessing — they’re calculating. The surge in 1-year fixed lending reflects a broader strategy: lock in savings now, keep options open for later, and stay agile in a market that’s still settling.

If you’ve got lending coming up for renewal, now’s the time to speak to a mortgage adviser.

Oliver Pearson

Manager and Property Investor for 20+ years

Oliver Pearson

Manager and Property Investor for 20+ years

Oliver Pearson began investing in property aged 21 and has since bought, developed and sold real estate in the UK, USA, South East Asia and New Zealand. After a career in banking he is now on the management team at Waikato Real Estate and has contributed to property articles for NZ Herald, Stuff and Property Investor Magazine.

Based in Raglan, Oliver's passions extend beyond property to surfing, hydrofoiling, and providing a taxi service for his children.