The first signs are emerging of a spring campaign amongst banks for home loan business. As reported in Good Returns Kiwibank was the first to move.
Its point of attack in the market is the three year rate, not the two year rate where battles have traditionally been fought in the past couple of years.
Kiwibank's move on Monday was to drop its three year rate to 8.60% a full 50-basis points lower than other mainstream banks.
Westpac, which sat out the first war a couple of years ago but decided to be an aggressive player last year, was the first to follow suit cutting its rate.
ASB and its relations, Bank Direct and Sovereign also made cuts.
As an aside it appears Bank Direct is gradually being merged into ASB – currently its rates are the same.
What will be fascinating to watch this time around is what the Bank of New Zealand does. There are indications that while BNZ was the chief protagonist in wars previously that it may take a less active role this time. Its current ad campaign is not about rate, but about contributions to legals.
While the bank action is the three and five year terms, the non-bank sector of the home loan market is doing something quite different.
In this area we are seeing some cuts in two-year rates, after a long period of rises.
These cuts come on the back of last week's Official Cash Rate announcement.
Reserve Bank governor left the OCR unchanged and again signalled that any easing was still some way off.
Good Returns conducts a survey of economists asking them for their predictions on interest rate movements. The graph on the right shows that there is a wide range of views about when the OCR will start falling and when it does by how much.
What appears to be driving the current decreases is heightened competitive pressure as lenders jockey for market share at a time when the housing market is likely to pick up. Secondly the spreads between carded rates and swap rates (the rates banks buy their money at) have widened. This gap allows for some sharper pricing of loans.
It is a little early in the piece to tell whether Kiwibank's moves signal the start of full on competition, but Good Returns will be watching this space carefully.
Currently amongst the big banks there is no differences in standard rates for floating rates, and terms of six months, one, two and four years.
Floating rates sit at 10.55%, six months, 9.60%, one year 9.50%, two-years 9.15% and four years 9.00%.
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