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The fixed interest rate loan competition continues unabated, despite one day of no changes during the last week.

The banks and bank-related organisations are setting the example for decreases, particularly in the longer-term rates.

Westpac has cut rates twice in the last week, while ASB, BNZ, Bank Direct, National Bank, Sovereign, Kiwibank, TSB Bank and SBS also announced decreases.

The competitive action seems to be moving towards longer term rates.

A number of organisations are running ads in the mainstream media pushing their five-year or seven-year rates.

At the same time, ASB has started a new campaign based around customer service.

The biggest change over the week is Kiwibank’s introduction of a five-year special of 7.49% -- a reduction of 31 basis points. The conditions on the special include a minimum size of $300,000 and Auckland only.

A number of non-bank lenders dropped their five-year rates. These include Cairns Lockie, Equitable, General Finance, GEM Home Loans, Premier, Tasman Mortgages, Olympic, Resi and Argosy. Equitable also cut all its fixed rates for its Prime First Equity Loans.

Economists continue to differ in their views about what to do. Westpac chief economist Brendan O’Donovan is recommending borrowers fix the bulk of their loan on terms of up to 18 months. He anticipates a Reserve Bank easing in the third quarter. BNZ chief economist Tony Alexander believes there’ll be no easing until early 2007. He advises borrowers to take advantage of the decreases to get fixed for two or three years.

The financial markets are too optimistic that an easing will be sooner rather than later, so fixed rates could easily go back up again in the next few months, Alexander says.

In the marketplace, variable rates still start at the 8.50% offered by Napier Building Society and spread to the 9.75% recorded by Headstart. The major banks are clustered at the 9.55% level.

One-year rates remain between the 7.6% offered by Southern Cross to 9.1% from GEM Home Loans.

Two-year fixed terms continue to be stacked between the 7.75% offered by Southern Cross to 9.25% from Headstart.

Three-year rates vary between the 7.60% offered by Kiwibank to Headstart’s 9.15%.

In the four-year part of the market, Superbank offers the lowest rate of 7.80% and the competitors are in a narrow range up to 8.15% from Pioneer.

For five years, rates differ between the 7.6% offered by BankDirect, NZ Home Loans and Sovereign to Gem Home Loans’ 8.55%.

To compare mortgage rates visit the Good Returns Mortgage Centre