Kiwi home owners could save a healthy wad of cash by breaking their home loan deals and refixing on currently record low interest rates.

It comes as ANZ triggered a mortgage war last November by becoming the first major bank since World War II to offer a one-year fixed term 3.95 per cent mortgage rate.

However, the competition has heated up since then with three of the four major banks - ASB, BNZ and Westpac - now offering 3.95 per cent rates over longer three-year fixed terms.

Canstar - a company specialising in comparing financial services - says the mortgage war has made more it feasible for Kiwis to weigh up whether they will save money by switching lenders.

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It used two "indicative case studies" to highlight the potential savings and costs of switching.

The first instance looked at a borrower who took out a two-year fixed home loan six months ago, when the average two-year rate was 4.52 per cent.

"If this borrower switched to the minimum two-year fixed rate of 3.99 per cent currently available on the market, and paid a break fee of approximately $1800, they could save more than $1300 due to interest cost savings," Canstar's analysis said.

With three-year fixed rates now at 3.95 per cent at ASB, BNZ and Westpac, home owners could be in line to save money if they make the switch. Photo / File
With three-year fixed rates now at 3.95 per cent at ASB, BNZ and Westpac, home owners could be in line to save money if they make the switch. Photo / File

However, not everyone would save. A borrower who took out a new home loan at the start of this month on a two-year rate of 4.37 per cent - the average at that time - would save $878.94 in interest charges on the new 3.99 per cent rates.

However, they would also incur an $1800 break fee, meaning they would be worse off by $921.06.

Canstar NZ general manager Jose George said borrowers needed to do their homework and be prepared to haggle.

"We encourage borrowers to negotiate – including on break fees and other administrative costs charged – particularly as lenders compete to retain home loan customers," he said.

The record low interest rates come as house sales have slumped in recent months.

There were 963 house sales last month - about 100 sales less than the same time last year - while February was especially quiet with 474 sales, real estate agents Barfoot & Thompson report.

Consumer research company Canstar says home loan customers are in a strong position and should negotiate with banks for a better home loan deal. Photo / Chris Loufte
Consumer research company Canstar says home loan customers are in a strong position and should negotiate with banks for a better home loan deal. Photo / Chris Loufte

This together with tougher lending rules designed to ensure those taking out home loans can afford them has left the banks with fewer new customers.

It's led them to compete fiercely for new customers and to try and steal away customers from each other.

Amidst the cut and thrust of this mortgage war, Canstar has picked out ASB as its Bank of the Year - Home Loans.

It said ASB had not only offered value-for-money home loans but had a wide range of public housing market reports and education and budgeting tools, such as mortgage repayment calculators available.

"Overall ASB is leading the way in providing access to branches and services, its combination of strong product assessment performance, and its leading institutional offering," Canstar's George said.

ASB retail product general manager Glen Martin said first-home buyers needed every help they could get, given high prices had made it "still challenging to get into the housing market".