HSBC's low interest rate is part of the bank's growth strategy and is not a loss-leader, insists its head of retail banking.

The bank launched a market low home loan rate of 3.87 per cent on an 18-month fixed term today.

Those who take it up must borrow at least $500,000, or have investments worth over $100,0000 with it.

Glen Tonks, head of retail banking and wealth management at HSBC New Zealand, said the bank was still able to make money on the rate and it was designed to boost its growth.


"We are serious about growth in New Zealand. This is not a stunt."

Tonks said the bank had grown above the market rate this year with much of the growth coming from Auckland, despite a slowdown in the city's housing market.

"The reality is many people have mortgages over half a million dollars."

Tonks said it was pleased with the number of people switching their mortgages to it.

He would not give a timeframe for how long the offer would be available for, but said it was for a limited time.

The rate was only being offered for a limited time to new HSBC Premier customers, and existing HSBC Premier customers who borrow at least an additional $100,000.

An individual can qualify to become an HSBC Premier customer either via a minimum combined home loan of $500,000 or $100,000 in savings and investments with HSBC.

To qualify, customers have to provide an owner occupied property as all or part of the security.


The banks said minimum deposit and equity criteria also applied.

Mortgage rates have been rising slowing this year and are picked to continue rising on the back of rising funding costs for banks.

Asked if the bank planned to continue offering ultra low rates he said: "Generally interest rates are rising. The US Federal Reserve has signalled its next move is up."

"What we are committed to is being consistently competitive."

Massey University associate professor David Tripe wasn't expecting that other banks would rush to match the HSBC rate.

"HSBC, as I understand it, have good funding sources through their network ... and they're keen to get some loans out to some good customers.

Tripe said that generally rates had stabilised but were expected to go up in the next 18 to 24 months.

"People are picking the Reserve Bank to push [the] Official Cash Rate late next year to early 2019 so that would all be consistent with that sort of outcome," Tripe said.