TSB and HSBC, are offering one-year fixed mortgage rates below 2.5 percent, undercutting the major banks.
It follows a series of mortgage rate drops in May, when fixed mortgage interest rates fell below 3 percent for the first time.
From Tuesday, TSB bank will offer mortgage customers a one-year fixed interest rate of 2.49 percent, or 2.65 percent for two years. With one-year fixed rates across the major banks still sitting at 2.55 percent, TSB's rate is 0.06 percent lower. HSBC's one-year fixed rate is lower still, at 2.45 percent.
TSB general manager marketing and customer experience Justine St John, said the bank was abiding by its promise to match any fixed-rate advertised by an Aussie bank. The new one and two-year rates are the lowest it's ever offered.
“It’s more important than ever that people are provided with a wide variety of competitive lending rates to support their financial needs," St John said.
As the country fights a second wave of COVID-19, low interest rates are expected to help ease cash flow for borrowers.
“We’re also pleased to give New Zealanders another reason to bank local and keep money revolving through our local economy at a time like this,” she added.
John Bolton, chief executive at mortgage broking company Squirrel, said although the rate drop is only small compared to what other banks are offering, TSB and HSBC have set a new low for the market. He expects others to follow.
"I’d expect to see lower long term fixed rates: I'm surprised that TSB didn’t lower their 2-year and 3-year rates further," he said.
For homeowners coming off a higher fixed interest rate, Bolton suggests they look at short-term fixed rates, for example, a one or two-year fixed rate.
"If you're buying or refixing, wait until closer to the date before you refix your rate and don’t lock in your rates too early," Bolton advised.
The advertised rate specials were generally the best available, meaning there was little room to negotiate further with the bank. But other incentives could.
"If you're buying a property, there still is generally a cash-back incentive available that needs to be negotiated," he added.