New Zealand's third-biggest bank, Westpac, has signalled that it is willing to lend to home-buyers with less than a 20 per cent deposit - but at a cost.

The bank started an advertising campaign this week offering to lend more than 80 per cent of the value of a house to people intending to live in the house.

But spokesman Craig Dowling said the offer was not for apartments or investors intending to rent out properties, and would come with higher interest rates.

Buyers who could only stump up a 15 per cent deposit would pay 0.25 per cent above the standard interest rate, and buyers with only a 10 per cent deposit would pay a 0.5 per cent premium. Based on the bank's current two-year fixed mortgage rate, buyers would pay 6.25 per cent interest with a full 20 per cent deposit, 6.5 per cent with a 15 per cent deposit or 6.75 per cent with only a 10 per cent deposit.

The move is confined to Westpac. All other major banks said they did not plan changes in lending criteria.

Mr Dowling said Westpac had attracted more money from competitive interest rates for bank deposits, and believed that house prices were finally "settling down" after declining over the past year. "We recognise that in some areas there may still be some further falls," he said. "In other areas, influenced by things such as migrant numbers and returning Kiwis and competition for the housing stock, we think that people can in some situations have a little bit more confidence, particularly if they have secure income streams to furnish their mortgage payments."

Westpac never formally required a 20 per cent deposit, but the country's biggest bank, ANZ-National, did announce a 20 per cent deposit requirement last November.

Mr Dowling said many would-be home-buyers wrongly believed they would need to reach the 20 per cent level. "To a degree we have maintained a broader range, rather than the 20 per cent being a line in the sand. We assessed things on a case by case basis," he said.

"We were finding that people were not even coming forward to have those discussions.

"So this is a recognition that the market has moved a little bit into a territory where we think those conversations are more likely to be positive."

He said this did not apply to investors who might be more highly leveraged, and it did not apply to apartments where price "uncertainty still remains".

ANZ-National spokeswoman Virginia Stracey-Clitherow said her bank would also make exceptions, but "generally speaking we don't offer new lending in excess of 80 per cent loan-to-value ratio".

ASB chief executive retail banking Ian Park said a 20 per cent deposit was "the standard requirement ... since mid last year which was when it was clear there was some uncertainty about asset values and unemployment would be increasing".

"Exceptions to this may be when the borrowers are in a very strong stable financial position, then the 20 per cent deposit requirement may be renegotiated, such as a professional couple returning to NZ with firm jobs here and solid income streams," he said.

Bank of New Zealand spokeswoman Diane Maxwell said the BNZ had always lent above 80 per cent of property value in some cases, but these made up only 11 per cent of its mortgages.

Kiwibank spokesman Bruce Thompson said Kiwibank had also lent above 80 per cent in some cases, but at higher interest rates.

Are banks fair on mortgage rate levels? Have your say online.