Westpac cutting 4 and 5 year mortgage rates to under 6%

Westpac is cutting its advertised, or carded, four and five year home loan rates to fresh market lows.

The bank says, effective tomorrow September 21, its four-year rate will drop 21 basis points to 5.99% from 6.20% and its five-year rate will be cut 61 basis points, also to 5.99%, from 6.60%.

The new Westpac four-year rate is the lowest one of that duration advertised by a bank and the new five-year rate is level with SBS Bank.

Westpac general manager for retail, Gai McGrath, said the 61 basis point cut is for a limited time and is aimed at giving customers the option of long-term certainty.

"It is an opportunity for us to provide some more choices for customers who are looking to get more certainty in the longer-term," McGrath said. "So given where things are at, and some signalling from the Reserve Bank around interest rate tightening, we just felt there's a real opportunity with a gap in the market really."

She said Westpac was now the only (major) bank with all its advertised fixed-term rates below 6%, SBS also has all its rates under 6%. Westpac's floating, or variable, rate remains 5.6%. See all advertised bank home loan rates here.

McGrath said that Westpac continues to see about a 50-50 split between customers choosing to fix mortgages and those going for floating rates, with the bulk of fixers going for shorter durations. There had also been an increase in customers' choosing a combination of both options.

"In recent times a lot of the customers interested in longer-term (rates) have been staying on floating, watching the market. What we believe is by offering our highly competitive rate in the (longer-term) space you're giving some choice for customers who also really would like a bit more certainty about what their borrowing costs are going to be over the longer-term," said McGrath.

Westpac's economic forecasts were still predicting the Reserve Bank will start increasing the Official Cash Rate from its current level of 2.5% from the latter half of next year.

"Today's GDP figures, we believe, still indicate we think that's where the Reserve Bank is at," added McGrath.

June quarter Gross Domestic Product rose 0.6%, according to Statistics New Zealand, ahead of most economists' forecasts for 0.3% to 0.4% growth.

"It's a question of whether or not the steepening happens as rapidly as we currently are forecasting, - depending on the situations we've got going on in Europe and obviously with the exchange rate. Although our view is the Reserve Bank has less of an appetite to be involved in exchange rate issues.  From our perspective the main thing is for customers who are looking for certainty to know that they can get that," McGrath said.

(Update adds further comments from Gai McGrath, & clarifies Westpac is the only major bank with all its advertised fixed-term rates under 6%, not the only bank).

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