10 Apr 2015

Mortgage wars lead to interest rate cut

5:10 pm on 10 April 2015

An economist says intense competition between big lenders has forced the BNZ and ASB banks to cut their fixed mortgage rates.

The BNZ has dropped its two-year rate to 5.15 percent, and ASB Bank has lowered its three year rate to 5.45 percent.

The principal economist at the Institute of Economic Research, Shamubeel Eaqub, said Auckland's booming housing market had not resulted in a flood of new borrowers nationally.

"It continues to be a very competitive mortgage market. Despite a very strong housing market we haven't seen borrowing growth being particulalry strong, so the banks are really fighting over a relatively small share of the market."

Mr Eaqub said banks' profits might be suffering as a result of the mortgage war, but their borrowing rate in the international market was still very low.

Cuts will push Auckland prices up - KPMG

A financial analyst says the cuts to mortgage rates by will push up house prices in Auckland even further.

The head of financial services at KPMG, John Kensington, said this would make it easier for people to afford more expensive homes.

He says a couple who may have only been able to afford to bid $750,000 on a house before would now be able to bid up to $775,000.

Mr Kensington said those wanting to take advantage of the low rates needed to move quickly however, as he predicted they will only be around for a year at the most.

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