Westpac ups ante in mortgage war
Westpac is targeting the most popular category of mortgage rates with an aggressive market-leading "special" rate.
This morning the lender launched a new 4.99 per cent interest rate for a two-year fixed term, conditional on new lending of $50,000 and at least 20 per cent equity.
The move comes a day after ASB Bank cut its long-term fixed mortgage rates, reaffirming signs that the highly competitive home loan market is returning to life.
ASB cut 15-25 basis points off its three-, four- and five-year terms yesterday, while also bringing its special two-year rate to an end.
While longer-term rates tend to sit at the fringes of home loan borrowing, Westpac has chosen to target the most popular bracket.
A spokesperson said 40 per cent of the bank's new customers were fixing up in the two-year range.
That tallies with Reserve Bank figures for all banks, which show $32.2 billion of home loans were locked into two-year rates during November, or 40 per cent of the total fixed lending.
Westpac's conditional rate is now the lowest in the two-year category, undercutting its closest competitors which are sitting on 5.15 per cent and 5.25 per cent.
Renewed price cutting from Westpac and ASB is likely to spark new offers from competing lenders, as mortgage rate cuts typically happen in flurries.
A shock drop in annual inflation for the December quarter published last week added to the sentiment that interest rates will remain low for some time.
The Reserve Bank has kept its Official Cash Rate - which influences short-term mortgage rates - on hold at 2.5 per cent for almost two years. Economists expect it to remain unchanged until the end of the year or early 2014.
Leading investment strategists have also forecast a climate of rates remaining lower for longer over the next decade.