BNZ climbs back in the ring to battle for mortgages

The Bank of New Zealand has renewed hostilities in the battle for home mortgages by restarting its campaign of never being beaten by its four major rivals.

It is a rerun of the "Unbeatable" campaign that ran from mid-October to mid-December and affected all of the major banks' profits.

BNZ said the new starting offer of a two-year fixed-rate mortgage at 7.6 per cent was 0.2 per cent lower than any of its major competitors and it insists it will not be beaten no matter what they do.

It says it can offer the cut prices because it does not use mortgage brokers and can therefore pass on the savings on commissions to home buyers.

The new campaign, however, is still not as attractive as the rates offered last time. Then, BNZ offered loans at 6.9 per cent, charging rates as low as 0.3 percentage points above its own cost of borrowing.

In response ANZ and ASB dropped their two-year fixed home loan rates to 6.95 per cent. The National Bank offered 7.05 per cent, while Westpac held its rate at 7.4 per cent, claiming it had a "compelling value proposition".

ANZ-National partly later blamed the campaign for its flat profits of $180 million in the December quarter, while ASB's interest margins fell to a record low.

Westpac said it did a reasonable amount of business and had reasonable margins over the period.

Bank of New Zealand business development and strategy manager Andrew Whitechurch said the original "Unbeatable" campaign helped the bank lift its market share.

Typically BNZ holds around 16 per cent of the mortgage market, but in December it lifted that to 26 per cent, growing its home loan book by $345 million, two-fifths higher than any previous month's growth.

Over the December quarter it held 21 per cent of the market.

Whitechurch also said the bank picked up a large number of customers who previously had no relationship with the bank.

"We were extremely pleased with the results we had," he said

But he was not convinced that consumers would see such dramatic cuts this time round.

"It is possible but I doubt we will get there. [The cuts were] our competitors testing us; they pushed the market right down," he said.

Whitechurch added that the costs of funds since then had risen from around 6.75 per cent in December to around 6.9 per cent now.

The "Unbeatable" promise is available only on home loans drawn down by April 8, although Whitechurch said the campaign might be extended.