Kiwibank, having cut its three year rate last week by 50 basis points is keeping up the pressure by cutting the cost of four and five-year rates. The rate over both terms is 8.65 per cent.
Westpac has cut its 3 and 5 year rates to 8.75 per cent and 8.60 per cent respectively and Wizard Home Loans has launched a Spring special on two-year fixed rates at 8.80 per cent. At the time of writing, Wizard's move had made it the cheapest lender over the popular two-year term.
The tricky issue for borrowers is whether to put off a decision about a rate in the hope that the bout of Spring marketing activity will turn into an aggressive rate-cutting war. Conditions in financial markets are very different to those that prevailed when banks last engaged in a price war. It has become harder for banks to borrow and most of the large lenders have been desperately trying to rebuild margins this year. Furthermore, the Reserve Bank signaled earlier this year that it was concerned about discounting in the mortgage market.
Official, advertised rates charged by the largest banks are currently the same across all terms and it will probably take an aggressive move by one of the major players to start a war.
For borrowers, much depends on personal circumstances and how important it is to know where they stand with mortgage payments over the next few years, even if the rate they pay turns out to be a little over-the-odds. Those who can afford to tough it out need to do so in the knowledge that, given the international background and the contradictory forces at work in the market, they are taking a risk that competition will not be the force it has been in the recent past.
