By David Hargreaves and David Chaston
Kiwibank has launched a two-year fixed rate home loan rate of 3.99%.
This is the lowest fixed rate the bank has promoted since it was launched in 2002.
It is also possibly the lowest-ever rate offered by one of the 'big banks' in this country - though HSBC does have a 3.95% existing offer, which is about to end.
For the new Kiwibank mortgage, a minimum 20% deposit is required and the special rate will only be available for two weeks (ending May 27, 2016).
Kiwibank said the 3.99% rate "significantly undercuts" carded rates by competitor banks.
The action by Kiwibank comes amid a flurry of rate cutting.
Earlier today Westpac joined two other banks offering a 4.19% two year 'special' mortgage rate.
That involved a -20 bps cut in their previous 'special' for that term.
At the same time they have ended their 4.80% three year 'special', reverting to the standard 4.99% rate.
The new Westpac two year 'special' lines them up with TSB Bank who adopted the rate first, and ASB, who dropped to the same rate last week.
For the 2 year term, these three banks now have a +16 bps advantage over ANZ at carded rates, who have the largest mortgage book in New Zealand. 4.35% is ANZ's lowest carded rate of any term they offer.
Prior to Kiwibank's announcement, the lowest current carded rate offered by any bank for any term was by SBS Bank who are offering 4.10% for a fixed one year term. HSBC have announced the end of their 3.95% 18 month rate and borrowers will need to make their deal with them by May 20, and draw down by the end of the month if they wish to capture that rate.
Behind the scenes, wholesale swap rates remain near record lows. Most of the declines in this wholesale funding has not yet been passed on in mortgage rate offers (or taken from term deposit offers) - yet.
Banks are somewhat constrained by their core funding ratio obligations. They also claim that swap spreads 'are high', adding to their wholesale costs.
Here is where fixed rates stand after today's changes:
| below 80% LVR | 1 yr | 18mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| % | % | % | % | % | % | |
 |
4.25 | 4.89 | 4.35 | 4.99 | 5.20 | 5.30 |
 |
4.25 | 4.25 | 4.19 | 4.65 | 5.00 | 5.15 |
 |
4.25 | 4.99 | 4.39 | 4.64 | 4.99 | 5.15 |
 |
4.29 | 3.99 | 4.75 | 4.90 | 4.99 | |
 |
4.25 | 4.95 | 4.19 | 4.99 | 5.09 | 5.19 |
 |
4.25 | 4.35 | 4.35 | 4.65 | 4.89 | 4.99 |
 |
4.25 | 3.95 | 4.39 | 4.59 | 4.79 | 4.99 |
 |
4.10 | 4.35 | 4.29 | 4.65 | 4.99 | |
 |
4.35 | 4.35 | 4.19 | 4.79 | 5.35 | 5.35 |
In addition, BNZ has a fixed seven year rate of 5.55%, while TSB Bank offers a fixed ten year rate at 5.75%.
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