Kiwibank has opened what is expected to be a bidding contest for mortgage business with a cut to its two-year fixed interest rate.

The Government-owned bank cut its two-year rate and is offering cash incentives for all new home lending above $100,000 with a minimum 20% equity.

Mid-January was traditionally a time when the home loan market became active and competition increased between the banks, Kiwibank communications manager Bruce Thompson said.

Experts are expecting mortgage competition to heat up with the big banks tipped to compete for fixed home loans.   The attraction of longer-term mortgages for the banks, would result in homeowners having access to very attractive rates.

PwC (PricewaterhouseCoopers) partner Sam Shuttleworth said mortgage holders continued to move their borrowing off floating interest rates, and onto fixed rate loans. Floating mortgage rates usually worked out to be more expensive for borrowers than short-term fixed rates, such as the six-month rate.

Source: Otago Daily Times