A third bank has joined the fray in offering a sub-4 per cent fixed term mortgage rate and this time borrowers can lock it in for three years.

HSBC has launched a 3.95 per cent rate on a fixed term of either one, two or three years piling in with Westpac and Kiwibank to offer low rates.

Westpac reignited a mortgage war in mid-January offering a one-year fixed term rate of 3.99 per cent - down 16 basis points on its standard rate of 4.15 per cent.

The offer was meant to end on February 1 but a spokesman said it had now been "extended until further notice."


Meanwhile Kiwibank has a two year fixed term rate special of 3.99 per cent which is due to finish on February 11.

The HSBC rates are only available to new customers who have a home loan of at least $500,000, existing customers who borrow another $100k or those with savings and investments of $100k with the bank.

Chris Russell, chief executive officer of HSBC New Zealand, would not put a timeframe on how long its special would run for.

HSBC typically ran a rate campaign at this time of year and Russell said it was hoping to stimulate demand in what was "softening market."

"We certainly are seeing a softening in demand."

Russell wouldn't give specifics but said in terms of the overall percentage the decline compared to last year was "meaningful."

"I think there is certainly a bit of looking over the shoulder to the Australian market and wondering if it will happen here."

House prices in Sydney and Melbourne have fallen in recent months prompting concern that the falls will spread to Auckland.


"What we have seen in Sydney and Melbourne does make Auckland seem expensive," Russell said.

But he also pointed to a lot more properties for sale in Sydney boosting the supply side which had not happened in Auckland.

Russell said migration figures and GDP growth also remained strong in New Zealand.

"There is nothing to suggest we are going to have a down-turn."

HSBC's rate release comes as New Zealand's two-year swap rate fell to a historic low overnight Thursday after weaker-than-expected jobs numbers spurred investors to price in a greater chance of a cut in the official cash rate.

The two-year swap fell as low as 1.7980 per cent and recently traded at 1.8175 per cent versus 1.8980 per cent Tuesday ahead of the public holiday.

The rates fell after Statistics New Zealand said the seasonally adjusted unemployment rate rose to 4.3 per cent in the three months ended December 31, from a revised 4 per cent in the September quarter. Economists had expected it to be 4.1 per cent.

Markets moved from pricing in a 54 per cent chance of a rate cut this year to a 66 per cent chance after the data.

The Reserve Bank of New Zealand is due to give its next monetary policy statement on Wednesday.

Mortgage brokers say anyone due to re-fix their mortgage in the next 60 days should try and lock in an offer and those who were due to end their fix term in the next six to nine months should also weigh up the cost of breaking their mortgage to re-fix it at a lower rate.

Rival banks are said to be matching the rates even if their advertised rate is higher.