Kiwibank reduces one-year mortgage rate to record low

Kiwibank has reduced its one-year fixed-term home-loan rate to a record low. Photo / File

Kiwibank has reduced its one-year fixed-term home-loan interest rate to a new record low – dropping from 3.55 per cent to 3.39 per cent.

Kiwibank's offer, which is effective from Monday, will be available for a limited time and requires a minimum 20 per cent equity.

"Implications from the 'no rate change' decision were that wholesale rates increased. It's likely we'll be the outlier reducing our one-year home-loan rate but that is a position we're comfortable to hold," Chris Greig, Kiwibank general manager for borrowing and savings, said.

"We're keen to see a continuation in the momentum we've had in growth over the past year as more New Zealanders choose to bring their banking to Kiwibank."

Kiwibank is also currently offering $3,000 cash back for those that have at least $250,000 in new lending and make the switch to Kiwibank.

New Zealand's big four banks – ANZ, ASB, BNZ, and Westpac – all have a special one-year rate of 3.55 per cent.

On Wednesday the Reserve Bank left its official cash rate (OCR) unchanged at 1 per cent.

But ASB chief economist Nick Tuffley, who described the move as a surprise, said he expected the OCR to fall to 0.5 per cent.

"The most likely timing is the February and May MPS releases."

Kiwibank also lifted its one-year term-deposit rate from 2.70 per cent to 2.75 per cent.