It's been hard keeping up with all the rate cuts over the last month, with Kiwibank making the initial decision to drop its two-year rate by 20 basis points to 5.55 percent with a 20 percent deposit.  BNZ joined the party just a couple of days later, dropping its three-year rate to 5.59 percent with a 20 percent deposit.  After initially dropping its three-year rate from 5.85 percent to 5.59 percent, ASB has joined ANZ to match Kiwibank's offer of 5.55 percent.

It's not all about interest rate cuts, however, with a number of banks also offering cash incentives and introducing new long-term fixed-rate mortgages.  A new 10-year fixed-rate home loan has been announced by TSB, a first for New Zealand and another example of the ongoing mortgage war.  While no-one has matched TSB, other banks are also offering longer-term fixed-rate products in an effort to attract new customers.  BNZ are offering a 7-year fixed-rate mortgage at 6.89 percent, with Kiwibank, ASB, ANZ, and Westpac also offering 5-year mortgages at rates between 5.89 percent and 6.99 percent.  

According to TSB chief executive Kevin Murphy, "We canvassed home owners who had taken out a mortgage or renewed their mortgage in the last five years and they described our new offer as highly appealing...  We think there is a gap in the market and that consumers are looking for certainty around long-term interest rates."  The 5.89 percent rate for TSB's 10-year loan applies to both residential and investment property, with a minimum deposit of 20 percent required.

According to Massey University banking expert Associate Professor David Tripe, long-term fixed-rate mortgages offer certainty to a worried public, saying "It's about being certain about the future of your life, really."  However, ANZ spokesman Stefan Herrick said people are still cautious about longer-term loans, "as there is greater potential for financial or personal circumstances to change during the term of the loan, and the possibility of costs arising from exiting the loan early."

Lower rates are likely to fuel the New Zealand property market, with the already overheated Auckland market a particular concern.  While the Government has outlined its plans to reverse sky-rocketing house prices by forcing the Auckland Council and other local authorities to free up more land, demand for new properties continues to outstrip supply.  If rates do drop below 5 percent like some experts predict, the introduction of new tools to cool prices is not out of the question.  Whether that means a tighter LVR limit or something else entirely, recent rate drops may lead to tighter conditions down the track.