The latest round of mortgage wars is heating up, with the ASB, ANZ and Co-operative Bank announcing cuts to their interest rates in the fight to attract customers as we move into what is traditionally the peak time in house buying. The cuts reflect competition in the market, and that wholesale interest rates have also fallen.

BNZ and Kiwibank had trimmed some fixed-term rates, ASB, ANZ and the Co-operative Bank have now announced cuts.

Industry experts expect more to follow suit in the battle for the lucrative home loan market, with mortgage holders set to save thousands of dollars in repayments and potentially shave years off their loans.

But the banking sector is also being accused of price gouging to generate extra profit, with claims banks are unfairly levying thousands of dollars in additional charges on some low-equity borrowers. This month, Kiwibank cut its two-year rate for borrowers with at least a 20 per cent deposit. Days later, BNZ said it was cutting its "special" three-year rate for home buyers with at least 20 per cent equity. Last week ASB reduced its three-year special rate and yesterday it emerged ANZ had moved to match Kiwibank's two-year special. Meanwhile, the Co-operative Bank has cut its standard rates across the board, but low-equity borrowers will still incur a "premium" charge.

Many banks are also offering cash sweeteners in a bid to lure first home buyers or customers from rivals while the official cash rate is low.

However, economists warn it's also because the world economy looks bleak, with interest rates globally nudging down. The New Zealand economy might look good, but the global scene is worrying. Cameron Bagrie, chief economist at ANZ said "The main influences at the short end are oil prices and the strong NZ dollar TWI (trade-weighted index), which have dramatically altered the inflation outlook and mix of monetary conditions,"