Banks offer record low interest rate

Mortgage competition continues as banks offer home loan borrowers the lowest rates on record.

TSB is now offering a one-year home loan rate of 2.89 per cent. It is available to new and existing customers who have equity of at least 20 per cent.

Westpac has also cut rates – its two-year special has fallen to 2.99 per cent. It follows a move by Kiwibank and ASB last week to move home loan rates below 3 per cent for the first time.

Mortgage broker Glen McLeod, of Edge Mortgages, said borrowers were experiencing the impact of the pandemic.

‘‘If Covid-19 had not come along I don’t think we would have seen rates come down. The banks are only just starting to react. Like every business they need to make a profit and so . . . they have to try and entice the customer to borrow.’’

But he said actually getting the loan could be a challenge for borrowers.

Although loan-to-value restrictions have been lifted for the next year, banks are being cautious about new loans, McLeod said. Whether it was worth locking in a longer loan term was a decision for borrowers, he said.

‘‘As New Zealand heads towards recession, the Reserve Bank may need to look at further stimulus. Rate reductions may be a part of the overall solution, just how far they will go is too tough to call. Could a sub 2.5 per cent be a possibility? Possibly, but don’t bank on it.’’

Nick Tuffley, chief economist at ASB, said the rates on offer were ‘‘pushing the limit’’ of how far they could fall.

‘‘For substantially lower interest rates we would need one of a couple of things: The Reserve Bank to step up the current pace of government bond purchasing – over and above simply lifting the signalled quantity of bonds it will purchase, which it is likely to lift on Wednesday, or we would need to see the Reserve Bank cut the official cash rate to push wholesale rates down further.’’