Home loan interest rates war 'risks another boom'

ASB Bank on Friday lowered its rate to 6.95 per cent to undercut the Bank of New Zealand's market leading rate of 7.15 per cent.

However, the BNZ hit back with 6.9 per cent to maintain its promise of not being undercut till at least December 17.

In reality customers were generally able to get the lowest rate in the market regardless of who they banked with or the advertised rate.

National Bank economist John McDermott said the profit margin on the two-year rate was now so thin that after paying a mortgage broker's commission banks were making a loss.

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