Heartland has slashed its floating home loan rate to a record low 2.5 per cent - undercutting other bank's floating and some fixed-term interest rates.
Floating rates are typically much higher than fixed-term rates as banks like the certainty of having borrowers locked in for a certain period of time.
The big four Australian owned banks - ANZ, Westpac, ASB and BNZ currently have floating rates ranging from 4.44 per cent to 4.59 per cent.
The closest is Kiwibank which dropped its floating rate earlier this year to 3.4 per cent and was the lowest in the market until Heartland dropped its rate.
Heartland Bank has made a major play for home loan borrowers relaunching into the market last month with a record-breaking 1.99 per cent for a one year fixed term - the first time a New Zealand mortgage has gone under 2 per cent.
Jeff Greenslade, Heartland Group chief executive, said customers shouldn't have to pay so much for their floating home loan.
"Heartland's group structure provides us with broader funding flexibility. Alongside our digital strategy, we're able to offer products through innovative channels at a lower cost, and can pass that onto the borrower."
The rate is only available for homeowners refinancing or buying a standalone house on a single section and have a deposit or equity of at least 20 per cent and live or intend to live in the home.
The bank is also offering a cashback of $750 for those who refinance their home loan with the bank and take out the floating rate for at least 12 months.
If the customer moves to a fixed rate or leaves the bank before the end of that term they will have to pay that money back.
Banks are offering very competitive rates in what has become an unexpectedly hot housing market.
Last week TSB cut its two-year and 18-month fixed term rate to 2.49 per cent undercutting the big banks.
Only Heartland bank remains lower with its one year rate of 1.99 per cent and two-year rate of 2.35 per cent.
This week the Reserve Bank will announce its latest review of monetary policy on Wednesday with the official cash rate expected to remain on hold at the record low of 0.25 per cent.
But it is also expected to reiterate its desire to take the official cash rate negative in the future. Banks have been told they must have their systems ready to handle a negative rate from December 1 with economists picking the cash rate could go negative from April next year.