Bank profits are suffering due to greater numbers of borrowers moving from floating to fixed mortgage rates to take advantage of low interest rates.
PricewaterhouseCooper's latest banking report shows ANZ, ASB, BNZ, Kiwibank and Westpac together experienced the biggest jump in lending in the second half of the 2012 financial year, boosting their lending books by $5.2 billion.
But they are not making as much money as they used to, with pre-tax profits falling 11% to just over $2 billion.
PWC partner Sam Shuttleworth said tighter capital controls, higher borrowing costs and strong competition hit banks' profits, while huge numbers of borrowers also moved to less profitable fixed mortgage rates, reversing a two year trend favouring floating rates.
He said in March 2012 approximately 63% of households with mortgages were on floating rates, but by September 2012 that had dropped to 58%.
"That reserves the trend that we've seen previously where there was an increasing share of mortgages going into floating rates, so this has actually been a reversal of what we've experienced over the last 18 - 24 months."
Mr Shuttleworth believes borrowers can expect the competitive rates to continue for some time.
He said banks' bad debts appear to have stabilised, and with the property market flourishing again, the sector's prospects look positive.
