Kiwibank laying down the gauntlet

It isn't the only lender to do this, BNZ has dropped the floating rate on one of its products, Total Money, and Napier Building Society has also made a reduction with this term.

Kiwibank acting chief executive Paul Brock says recent comments by the Reserve Bank governor Alan Bollard that the Official Cash Rate (OCR) is likely to stay at its current level or lower for some time gave it confidence to again cut rates.

"The wholesale markets and deposit rates being offered by banks clearly indicate that in the longer term, rates will rise. But for now we see the opportunity to pass through additional savings on variable rates for our customers.

The moves are a challenge to the other banks and will no doubt look attractive to borrowers as the majority appear to be using shorter-term rates for their home loans.