Mortgage rates are continuing to tumble as another major bank cut its rate to a record low this morning.

ASB bank will offer 2.69 per cent over two years fixed on home loans from tomorrow, undercutting moves made by rival banks this week.

It follows Westpac which yesterday cut its one year fixed term rate to 2.79 per cent, matching a move made by ANZ earlier in the week.

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Mortgage wars: ASB cuts two year home loan rate to 2.69%

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Craig Sims, ASB executive general manager retail banking, said the reduced rate would be welcome news for many home owners and first home buyers.

"We hope this will help them manage their home loans, or enable others to be in a position to get into their first home."

Sims said it had been an incredibly challenging period for a lot of its customers.

"We're doing everything we can to support them and make things a little bit easier. We're confident these new rates will help with that.

"We have put in place a number of support options over the last few months, including mortgage repayment deferrals and interest-only payments, and we are continuing to review these to make sure we are supporting our customers financial wellbeing as best we can."

Mortgage rates are tumbling this week. Photo/ file
Mortgage rates are tumbling this week. Photo/ file

Sims said it had been encouraging to see the country start to re-open and New Zealanders return to work.

"But we're conscious that the impacts of Covid-19 will still be felt for a while to come, and we will continue to help our customers through that."

ASB has cut its rates by between 20 and 34 basis points for terms between six months and four years.

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The fresh round of home loan rate reductions follows Reserve Bank Deputy Governor Geoff Bascand's comments on Monday that the central bank's bond buying efforts had so far been effective in reducing wholesale interest rates, but that they were not translating quickly enough into lower mortgage rates.

"We have seen some banks reduce their mortgage rates but we still think that there is a way to go," he told the Herald.

Westpac's new rates, available from Monday, will drop fixed home loan rates drop from the current 3.05 per cent.

Its two-year fixed home loan rate will also drop to 2.79 per cent from 2.99 per cent.

On Wednesday, Ben Kelleher, ANZ managing director retail and business banking, said the new rates put more money in the pockets of customers.

"These new rates reflect a new reality where many home loan customers are facing uncertain times and our commitment to keeping rates as low as possible to help ease the pressure," Kelleher said.

"Putting more money back in the pockets of customers will enable them to repay debt, or support the wider New Zealand economy as the country recovers from restrictions brought on by Covid-19."

No decision had been made on how long the rate would be available, but it would largely depend on market conditions.