Interest rate war

PHOTO: (File image). Photo: RNZ / Nate McKinnon

A mortgage rate war could be on the way as banks look to lend more money to potential homebuyers.

Heartland Bank has stoked the fire with a record low, one-year fixed loan rate of 1.99 percent.

Meanwhile, house prices continue to defy Covid-19, with figures from the Real Estate Institute showing the median house price is now $685,000.

Homes are also being bought at a faster rate, meaning the number of new listings is staying low.

Heartland Bank’s announcement that it will offer a 1.99 percent mortgage rate is likely to be followed by others, according to Massey Business School associate professor Claire Matthews.

She said a mortgage rate war was very much on the cards.

“I think there’s every likelihood that there’s going to be a bit of an interest rate war,” Matthews said.

“This tends to be the time of year when the lenders have interest rate wars. We haven’t had them seriously in the last couple of years.”

Spring was often a time when people bought houses, which caused some excitement at banks, Matthews said.

Banks might look to compete, but it would depend on how much funding Heartland Bank had, she said.