Kapiti-based mortgage broker Simon Rule says when it comes to mortgages with loan-to-valuation ratios (LVRs) above 90%, he can't see how Kiwibank's loans can possibly be cheaper.

That's because Kiwibank is still using an external insurer, Australia-based QBE, for such loans and charges low equity premiums of up to 4.18% on a mortgage with an LVR of 95%.

"Most banks charge a maximum of 1% of the loan amount borrowed as a one-off low equity premium," Rule says.

On a mortgage of $605,000 with a 95% LVR, Kiwibank can charge a one-off premium of up to $25,289 while ASB Bank would charge only $6,050, Rule says.

"There's no way you're going to be better off after six years. They should be putting on a disclaimer," he says.

However, Kiwibank spokesman Bruce Thompson the bank backs itself to make good on its guarantee and its history shows its has - the bank was launched in 2002.

"The bottom line is, if we don't measure up, we will pay. There is no risk. If you think it will be cheaper to go with Westpac, you should still go with Kiwibank because, no matter what, you will be better off with Kiwibank," Thompson says. Kiwibank has never had to compensate a borrower under the guarantee, he says. The guarantee applies to the four major bank's standard rates only.

With mortgages with LVRs above 95%, Kiwibank doesn't necessarily charge the full potential premium and, as with any new customers, usually offers a contribution towards expenses, Thompson says.

Rule questions why Kiwibank is still using the expensive option of an external insurer.

Thompson says Kiwibank doesn't have to explain why. "That is a business decision."