Five Kiwi banks are offering home loan rates of 3.99 per cent or lower as a mortgage war for new customers flares up again.

Westpac today became the latest to offer a two-year 3.99 per cent fixed home loan, joining ASB, TSB and Kiwibank in offering the ultra low deal.

HSBC had earlier this month also launched a two-year special rate of 3.69 per cent, the lowest-ever fixed home loan rate by any bank in New Zealand.

Five Kiwi banks are offering home loan interest rate deals below 4 per cent. Photo / File
Five Kiwi banks are offering home loan interest rate deals below 4 per cent. Photo / File

The deals come as the number of house sales in Auckland last month slumped to their lowest levels in a decade, according to agents Barfoot and Thompson.

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Nick Goodall, the head of research for analysts CoreLogic, said the tight market meant more banks were "playing the game" and being drawn into the mortgage war.

"If there are less people buying and selling property, where are the banks going to get their new mortgages from – well, it tends to be from people refinancing existing mortgages," he said.

"And the biggest way to attract customers from other banks is to be in the news with headlines about your low rates."

This fight for home loan customers has flared on-and-off since last November when ANZ - the country's largest bank - offered a one-year fixed rate of 3.95 per cent.

It was the lowest offered by a major bank since just after World War II and was quickly followed by matching or similar deals from the three other big banks, ASB, Westpac and BNZ.

While the deals were offered for only a short time, ANZ later said about 15,000 customers took advantage of the special.

"This helped grow our market share in November, contributing to more than $500 million in new home lending," a bank spokeswoman said.

Loan Market mortgage broker Bruce Patten said many banks had been willing to price match and continue to offer low deals behind the scenes in the months since then.

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Banks are being drawn into a mortgage war as February house sales fell 9.5 per cent year on year across NZ. Photo / File
Banks are being drawn into a mortgage war as February house sales fell 9.5 per cent year on year across NZ. Photo / File

However, HSBC's launch of its 3.69 per cent two year rate earlier this month set off a new flurry of marketing and ultra-low deals, he said.

"They really want to show people they are in the market," he said.

CoreLogic's Goodall said Reserve Bank regulation changes this year had allowed banks to lend to more customers, who have deposits less than 20 per cent of the purchase price of the houses they are buying.

This meant there were now more first-home buyers with smaller deposits entering the housing market and seeking home loans.

Westpac New Zealand and its chief executive David McLean have offered a two-year home loan with a 3.99 per cent interest rate. Photo / Brett Phibbs
Westpac New Zealand and its chief executive David McLean have offered a two-year home loan with a 3.99 per cent interest rate. Photo / Brett Phibbs

This led CoreLogic to advise banks during a recent speaking tour "that if you are not in the market for first-home buyers with lower deposits you will lose market share because that is where a lot of the growth is".

However, Westpac's latest two-year 3.99 per cent rate comes with some strings attached and isn't aimed low deposit first-home buyers.

To get the loan, customers instead need to have at least a 20 per cent deposit and a salary feeding into a Westpac account.

HSBC's 3.69 per cent two-year deal, similarly, was only open to new "premier customers" with either a minimum combined home loan of $500,000 or $100,000 in savings and investments with HSBC New Zealand.

Existing premier customers would need to borrow an additional $100,000 or more to get the deal.