Westpac has announced cuts to three of its fixed mortgage rates, in an apparent attempt to win over customers from its opposition.
The bank has reduced its one year rate from 5.25% to 4.89%, its three-year rate from 5.90% to 5.39% and its five-year rate from 5.99% to 5.75%.
General Manager Retail Bank Ian Blair said the bank was "unsure" about how long they could sustain the rates for, and would be reviewing them weekly.
"Anyone whose mortgage is due to roll over or who is reviewing their current financial position should make hay while the sun shines," said Blair.
However, the rates are accompanied by some restrictions, and require minimum 20% equity and minimum new lending of $100,000, suggesting that the bank is hoping to win new customers rather than refinance existing loans.
Westpac's one year-rate compares to the 5.45% offered by ASB, and the 5.25% offered by ANZ, BNZ, HSBC Premier and Kiwibank.
In the three-year market, Westpac's 5.39% is competing against ASB's offer of 5.75%, ANZ's and BNZ's 5.90%, HSBC's 5.74% and Kiwibank's 5.65%.
Mortgage expert Campbell Hastie told ONE News that Westpac's rate cuts are unsurprising considering the hammering they received in the December 2012 lending volume statistics.
"Their new business increase was at the bottom of the ladder at 0.25% or $90 million while in poll position was ANZ with a 1.7% increase or $900 million.
"Now you can try to soften that result whichever way you like but no one likes getting smashed that badly," said Hastie.
He added that the Westpac now faces a huge amount of effort to catch up, and they might "burn up a lot of capital doing it."
"I've no doubt ANZ burnt a fair few dollars during 2012 by dishing out big interest rate discounts and cash incentives for people to come across to them, or at least not leave once the National Bank merger had happened, and it will be interesting to see just how long Westpac can maintain the lead.
"Then once they've caught up it'll be hard to slow the momentum back down again because driving a bank is a lot like a driving an oil tanker - easy to keep going but hard to accelerate and hard to brake."
Window of opportunity
Hastie said that Westpac's rate cuts are good news for both new and existing homeowners.
"It's hard to argue against something that's cheaper for longer.
"For first home buyers it means housing affordability just got better and buying a house will be a little bit easier today than it was yesterday," he said.
"But like the last round of discounting that happened in winter 2012 this window of opportunity won't last forever. If you're currently on a floating rate (or your fixed rate is about to expire) now is as good a time as any to talk to your bank about a better deal."