Kiwibank has slashed its variable loan rates by 100 basis points in a move it says will save home loan and business banking customers $20 million.
The state-owned bank has dropped it floating and offset mortgage home loan rate from 4.4 per cent to 3.4 per cent and its revolving home loan rate from 4.45 per cent to 3.45 per cent.
While its business variable loan rate will fall from 6.5 per cent to 5.5 per cent, business revolving to 6.75 per cent and business overdraft rate from 8.5 per cent to 7.5 per cent.
The rate cuts come in for existing customers from June 29 and for new customers from June 15.
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Steve Jurkovich, Kiwibank chief executive, said the move would save $20m for more than 35,000 thousand home loan and business banking customers and would reduce the pricing gap between fixed and variable rates.
Despite the official cash rate being at an ultra low level of 0.25 per cent floating rates have stayed high while fixed term rates have continued to drop.
Most of the major banks are offering floating home loan rates around 4.44 per cent or 4.45 per cent while home owners can grab a rate as low as 2.65 per cent fixed over a year at the main trading banks and 2.55 per cent fixed for one year at Bank of China.
Jurkovich said a customer with a $400,000 variable loan would be $100 a fortnight better off.
"Of course, many customers choose a mix of variable and fixed loans, and as a result of today's reset, they could enjoy competitive rates and flexibility in an unprecedented way."
He said the new variable rates would also be a good option for first home buyers who don't have 20 per cent equity.