BNZ offers new 6.99% special rate for 6 month mortgage

There's a whiff of the 2004 'Unbeatable' mortgage price war in the air. BNZ is leading the charge again in slashing its lowest mortgage rate to below 7%, a key battleground 4 years ago when BNZ and ASB went at it hammer and tongs in the spring of 2004. That mortgage war over 2 year fixed rates gave the housing market a second wind that did not run out until the end of 2007 and hamstrung the Reserve Bank's efforts to slow the economy. The difference this time is that the battle is around the variable and 6 month rates and could restore some the Reserve Bank's monetary policy powers and lift the economy as it heads towards a difficult 2009. BNZ has announced a new 6.99% 6 month mortgage rate that makes it the lowest in the market, beating even Kiwibank's lowest rate of 7.29% for one year and Westpac's lowest rate of 7.19% for 18 months. ANZ and National's lowest rate is 7.3% for one year, while ASB's lowest rate is 7.35% for 6 months. BNZ's new one year rate is 7.29%, down from 8.29%, while its 2 year rate is 7.35%, down from 8.29%. This latest competitive first strike ahead of an expected 100 basis point cut in the Official Cash Rate next Thursday to 5.5% has increased the competitive intensity that is likely to drag many 2 and 3 year fixed rate borrowers down towards a 6 month or variable rate as interest rates drop quickly. Most economists see the OCR falling as low as 4% next year, meaning the variable and short term mortgage rates are likely to drop to 6-7%. Some economists, including Goldman Sachs and Deutsche Bank, are now forecasting a 150 bps cut on December 4. See all of BNZ's new fixed rates and how it compares with its rivals here on our mortgage rates table.