Westpac has cut its six-month, two-year and three-year mortgage rates.
The cuts of 0.1 - 0.2 of a percent follow a special offer by Kiwibank earlier this week.
The state-owned bank undercut the rest of the market on five-year mortgage rates by nearly half a percentage point.
The increased competition comes as banks face a flattening out in lending on houses.
Reserve Bank figures show annual lending growth fell from 1.7% growth at the start of the year to 1.3% in July.
At the same time, banks face a muddied picture on their own borrowing costs.
Base interest rates have eased slightly after the Reserve Bank last week cut back its forecasts for future rises in the Official Cash Rate.
But banks are facing higher risk premiums to borrow offshore, although few have accessed those markets recently.
Meanwhile, the real estate market showed signs of picking up in August. Sales were up 20% on the previous month though were still well below the August average over the past decade.
