Westpac seeks long-term borrowers
Westpac is going against the grain by trying to encourage customers to lock in to longer-term fixed mortgage rates.
The interest rate battles amongst the banks have mostly been fought in the shorter six-month to two-year terms, which are by far the most popular with homeowners.
But tomorrow Westpac will drop its four and five-year rates to 5.99 per cent for a limited time, its lowest in more than a decade.
The rates have been cut 21 and 61 basis points respectively, positioning the bank as the market leader for longer-term borrowing.
The closest bank competitors in the four-year category are ASB and TSB's 6.10 per cent, while all the major lenders are sitting on 6.50 per cent for five-year terms.
Westpac's general manager retail Gai McGrath said the cut was aimed at giving customers the option of securing some longer-term certainty.
"Particularly for first home buyers and investors who are looking to lock in their borrowing costs for a longer period of time, it gives them a really good option," she said.
However, Reserve Bank data shows longer-term mortgages are currently very unpopular with consumers, who may fear being locked in place if interest rates drop further.
Terms of four years or longer account for just 1.1 per cent of all mortgage lending, and 2.7 per cent of fixed interest home loans.
"The signalling from the Reserve Bank and the market in general is that the [interest rate] tightening cycle will start towards the back-end of next year," said McGrath.
"So this gives people again that certainty that they can lock in a really competitive rate."
Fixed mortgage rates are associated with the price of bank swap rates, which have remained relatively steady over the past few months after hitting record lows in June.
The Official Cash Rate, which also influences mortgage rates, is expected to remain at its record low of 2.5 per cent until late next year or even 2014.