15 Jan 2015

Banks battle for mortgage business

7:10 pm on 15 January 2015

It's house-hunting season and the competition between banks is heating up, with those looking to fix their mortgage expected to reap the benefits.

Both Kiwibank and BNZ have already reduced interest rates and one economist says New Zealanders can expect other banks to follow suit.

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Photo: 123RF

BNZ is now offering a 5.59 percent rate for a three year fixed-term for homebuyers, who have a minimum 20 percent deposit and move their banking with them.

Earlier this week, Kiwibank cut its two-year mortgage rate from 5.75 to 5.55 percent for borrowers who also have at least 20 percent.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said the biggest opportunity was for home-owners who could re-fix their mortgage.

He said they could keep payments the same while paying off their principal much quicker.

Mr Eaqub also said it was more than just a marketing strategy, as the two banks were passing on savings from a drop in borrowing cost.

"The reason why banks are facing a lower cost of borrowing is interest rates globally are coming down but also, in New Zealand, interest rates are not likely to rise any time in 2015."

Mr Eaqub said global interest rates were falling because of concerns over economic growth given falling commodity prices such as dairy and oil.

He said it was likely mortgage competition between banks would increase in the coming months.

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