Kiwibank cuts 1 to 5 year fixed-term mortgage rates by up to 40 basis points, continues with 4.99% 1-year 'special'

Westpac and ASB both moved to cut some of their advertised fixed-term mortgage interest rates late on Thursday, on the heels of cuts by Kiwibank earlier in the day. The Westpac move matched the state owned bank's new market low offers over two and three years, with ASB matching Kiwibank's four and five-year rates.

Westpac said, effective Friday morning, it's dropping its 18 month fixed-term rate by 34 basis points to 5.55%, its two-year rate by 24 basis points to 5.55%, its three-year rate 35 basis points to 5.75%, and its one-year capped rate by 25 basis points to 6.50%. Also effective from Friday morning, ASB cut its four and five-year rates by 40 basis points to 6.10% and 6.50%, respectively.

The cuts came after Kiwibank cut its standard, advertised one to five year fixed-term mortgage rates by up to 40 basis points and said it was keeping its 4.99% limited time one-year special offer open.

Kiwibank cut its standard one year rate by 40 basis points to 5.25% per annum, its two year rate by 24 basis points to 5.55%, its  three-year rate by 35 basis points to 5.75%, its four-year rate by 40 basis points to 6.10% and five-year rate by 40 basis points to 6.50%.

And late on Friday morning, TSB Bank announced cuts to all its advertised fixed-term rates from 18 months to five-years, except for its one-year rate which it left at 5.20%. The cuts mean TSB now has the lowest advertised one and two year rates.

TSB dropped its 18 month rate by 24 basis points to 5.65%, its two year rate by 28 basis points to 5.50%, its three-year rate by 35 basis points to 5.75%, its four-year rate by 40 basis points to 6.10%, and its five-year rate by 40 basis points to 6.50%.

Floating rates unchanged

Like other banks making recent cuts to their advertised mortgage rates, Kiwibank has left its floating, or variable, rate unchanged at 5.65%. The most recent Reserve Bank data shows 62.7% of the NZ$172.178 billion total value of the country's almost 1.4 million mortgages is floating and 37.3% fixed. That's the highest percentage on floating rates since the Reserve Bank began recording the data in 1998.

As for the 4.99% one-year special, which requires borrowers to have equity of at least 30% in their home, Kiwibank says it's keeping this offer open due to its "phenomenal success." Kiwibank says the offer is its most successful special to date, with it having lent NZ$110 million through it as of last Friday.

The special was launched on April 26 and Kiwibank normally operates short-term specials for no more than three weeks. Kiwibank says the special isn't a loss leader with it making "acceptable returns" on the 4.99% rate.

"The rate prompted a flurry of rate changes by other banks, but no direct match for the special," says Kiwibank.

So who has the lowest advertised rates now?

Kiwibank's fresh round of cuts brings its standard one-year rate in line with major rivals ASB, ANZ, National Bank and Westpac, but trails the 5.20% rate advertised by TSB. BNZ has a 5.10% 18-month rate.

For two years, TSB's new 5.50% rate is 5 basis points lower than the one on offer from  Kiwibank, Westpac and ASB as the lowest advertised by a bank. For three years ASB, The Co-operative Bank, Kiwibank, TSB and Westpac are all offering 5.75%. For four years ASB, Kiwibank and TSB have the lowest rate at 6.10%. Over five-years SBS Bank's 6.20% is the lowest advertised standard rate - although SBS also have a 'special conditions' 5 year rate of 5.99%.

See all advertised bank mortgage rates here.

The banks have been cutting their fixed-term mortgage rates with swap, or wholesale, interest rates the banks' themselves borrow at also falling on concerns about the state of the global economy given the turmoil in the Eurozone. Financial markets are now pricing in 30 basis points worth of cuts to the Official Cash Rate, from its record low of 2.5%, by the year's end.

(Updates add Westpac, ASB & TSB cuts, further detail).