Floating mortgage rates still sit at 40-year lows and are not likely to change in the short term, with the Reserve Bank expected to hold the official cash rate at 2.5% when it meets on Thursday.
Inflation fell in the year ended December and remains comfortably within the 1% to 3% target band.
Economists are starting to forecast rising inflation for later in the year with the first lift in the official cash rate (OCR) likely mid-year.
Bank of New Zealand chief economist Tony Alexander said that while floating mortgage rates sat at four-decade lows, fixed interest rates for periods of three years and beyond were at average or above average levels.
"The time to fix everything for one of the long periods disappeared many months ago and for the majority of borrowers, the optimal strategy now is probably just to sit floating and budget for floating rates rising about 3% between the middle of this year and the end of 2011.
"That means floating rates will get back to their average levels sometime late in 2011 and borrowers will remain in an historically generous interest rate environment for up to another two years."
Mr Alexander's coming year forecasts implied floating mortgage rates would average about 6.2%.
The one-year lending rate was now 6.25%.
Because it was closer to the period when rates were expected to rise, Mr Alexander said he would now toss a coin between floating and fixing one year.
Before Christmas, the numbers stacked up in favour of floating.
Over the next two years, his forecasts for the OCR implied sitting on the floating mortgage rate would give an all up cost of about 7.2%, the same as the two-year fixed lending rate.
Once again, he might toss a coin between staying floating, or fixing for two years.
Past the next three years, got into "pure guesswork territory", but if forecasts were correct, the floating rate would average about 8%.
The three-year fixed rate is at present 7.95%.
"This is actually quite cool.
"For all three terms, the fixed rate equals the forecast floating rate cost.
"So, if I were a borrower contemplating a mortgage I won't be paying off for many years, what would I do?"Personally, I would float, and use the cashflow benefit to get the principal down on my mortgage as much as possible before the floating rate kicks up."
He was nearly 100% certain nothing would push him to fix three years or beyond over the next two to three years and fixing for two years was very unlikely given the rate jump from floating that would involve.
However, he would keep a watch on where the markets were going and saw a strong probability that he could fix one-year or even 18 months sometime in the first half of the year, Mr Alexander said.
Meanwhile, New Zealand home loan affordability deteriorated in December to its worst level since November 2008, after a rise in both house prices and mortgage rates, Interest.
co.nz's loan affordability report shows.
Affordability worsened most in Wellington, Nelson-Marlborough and Canterbury as median house prices rose to record highs despite low turnover.
Auckland was fast catching Queenstown again as the least affordable region in New Zealand as prices rose in the north and fell in Queenstown.
Affordability degraded faster later last year than at any time since the peak of the housing boom in early 2007.
The report showed that housing affordability was getting worse despite near record low interest rates.
It was practically unaffordable now for anyone on one median income to buy their own home in most of the major cities.
