5-year rate new front in bank mortgage war

Photo / Dean Purcell

More interest rates have been cut following a week of competition by the country's biggest banks to attract house hunters and mortgage holders.

Kiwibank will on Monday introduce a new five-year home loan rate of 5.89 per cent for buyers with a deposit of at least 20 per cent, slashing 60 basis points.

It was the first major bank to drop rates this year, cutting its two-year rate by 20 basis points to 5.55 per cent.

Its also offering a cash sweetener of $2,015 for new lending. Other banks are also offering cash incentives.

Westpac dropped its "special" five-year rate to 5.99 per cent yesterday, and its special two- and three-year rates.

Days after Kiwibank announced its first mortgage rate drop, BNZ offered a three-year special rate of 5.59 per cent.

ASB and ANZ matched Kiwibank's two-year rate with ASB also reducing its three-year special rate to 5.59 per cent.

The Co-operative Bank cut its standard rates across the board.

Mortgage broker Bruce Patten of Loan Market said he thought Kiwibank's five-year rate might be the lowest since the bottom of the Global Financial Crisis.

"We hit 5.95 with ASB in 2009. At the very peak of the credit crisis the five-year rate went below 5 per cent and it hasn't been back there since then," he said.

"It's really interesting that we're back there, considering how buoyant the market is. It's really just a further escalation of the mortgage wars between the banks - they're trying to grab some market share while the market's hot and there's a lot of activity. The summer period is always a very busy time of year."

Mr Patten said there was not really room to lower interest rates over any other terms.

"I think that's why Kiwibank's come in on that five-year space - because the reality is the two- and three-year space has already been done. I think they're just trying to set themselves apart ... and the reality is it's a great rate."

On Wednesday, the Government outlined its plans to reversing skyrocketing house prices across the country, which included forcing the Auckland Council and other local authorities to free up more land for new homes.

- Staff reporter

Home loan picks

Kiwibank

• 2-year rate: 5.55 %
• 5-year rate: 5.89%

BNZ

• 3-year special rate: 5.59 %

Westpac

• 3-year special rate: 5.89%
• 5-year special rate: 5.99%

ASB

• 2-year rate: 5.55%
• 3-year special rate: 5.59%

ANZ
• 2-year rate: 5.55%