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BNZ and Kiwibank have joined other banks in dropping their mortgage rates as two separate reports reveal the depth of the property price slump.
BNZ is dropping its fixed mortgage rates by between 21 and 90 basis points and Kiwibank is dropping both its fixed and floating rates.
Kiwibank's new floating, or variable, rate is 6.99 per cent. Kiwibank chief executive Sam Knowles said this was a cut of 46 basis points to the lowest rate for variable loans at Kiwibank since May 2004.
The new BNZ rate for two, three, four, five, six and seven-year standard fixed home loans is 6.99 per cent.
Kiwibank is cutting its two, three, four and five-year fixed rates. The new two-year rate is 7 per cent and three, four and five-year rate is 7.10 per cent.
Other banks have also dropped fixed mortgage rates this week and late last week.
The moves come after falls on the interest rate swap market in recent weeks from which fixed rate mortgages are priced. The Reserve Bank is also expected to lower its Official Cash Rate, now 5 per cent, again on January 29.
Westpac this week predicted that the OCR will be cut several times to a low of 2.5 per cent.
The drops came as Quotable Value revealed that the country's houses lost 7.4 per cent of their value in 2008 - much of that during the sales slump over the autumn and winter months.
But QV's Mark Dow said lower loan interest rates over the past three months had lifted market activity and by year's end had flattened out the dive in values.
Mr Dow said a significant driver of the property cycle was the proportion of lower value property sales.
This type of property had recorded high or steady sales from 2000 to 2007.
However, during last year sales significantly decreased because as the economy weakened "first-home buyers are usually the first to suffer".
Activity in the market returned to mid to higher-end properties during last year. In December, the QV house value index, calculated over the year's last three months, showed a 7.4 per cent decline over the same period in 2007.
Mr Dow said last year's dive was an inevitable correction.
"The question remains how long this period of falling property values will continue."
Real Estate Institute president Mike Elford said a market comeback was "not too far off".
Slightly more homes were sold in December than in the previous month.
The institute said the national median house price for December was $328,500 compared with $337,500 in November and $345,000 for the same period in 2007. This was a loss in median house price values of 4.78 per cent for the year.
Mr Elford said the number of homes sold in December was 4302 compared with 5597 in the previous December.
Homes also took longer to sell - a median of 45 days in December compared with 36 days in December 2007.
BNZ chief economist Tony Alexander said prospects for market recovery were clouded with risks that prices would fall further and that more people would lose jobs.
However, on the bright side, he personally thought the extent of price falls would be limited to 5 per cent.
One reason was that buyers would be attracted by cheaper loan interest.
Mr Alexander tipped medium-term loan interest rates coming down to 6 per cent to 6.5 per cent. He also pointed to fewer homes being built.
The Real Estate Institute median price for 116 houses sold in Northland in December was $312,500 compared with $335,000 in December 2007 when 147 were sold.
In Auckland, 1269 houses sold in December for a median price of $440,000 compared with 1665 sold for a median of $460,000 in December 2007.
The median for a house in the Waikato/Bay of Plenty/Gisborne region was $302,800 compared with $330,000 in December 2007 and lower sales of 613 compared with 852 in December 2007.
