Wellington, July 3 NZPA - Kiwibank has cut around a quarter of a percentage point off its three-year fixed rate mortgage, as it looks to cash in on home owners refixing loans coming due for renewal.

The state-owned bank today reduced most of its fixed rates, with all those from two to five years now below 9 percent.

For home owners with at least 20 percent equity in their property the three-year rate dropped 0.26 percent to 8.79 percent, although the two-year rate remained unchanged on 8.99 percent.

Kiwibank said the three-year rate was "significantly" below that offered by its competitors, while chief executive Sam Knowles said he expected the new rates to be keenly sought after by home owners seeking to refix loans coming due for renewal.

Spokesman Bruce Thompson said Kiwibank was largely self-funded and doing particularly well in attracting deposits.

So the funding was available, at the same time as some perception was being built into the market that official interest rates would come down, he said.

"So the wholesale markets also, we believe, are giving us an indication that there's room to move."

A survey of economists published by Reuters yesterday showed a majority expected the Reserve Bank to cut its interest rate to 7.5 percent by the end of the year, from 8.25 percent now.

Mr Thompson also said the three-year fixed rate seemed to be the time period where other banks were aggressively competing and Kiwibank believed it could beat them.

Kiwibank wanted to be on the shopping list of people who would be looking soon to re-fix mortgages they now had with the major banks, he said.

While Kiwibank's new rates would also be attractive to home loan new entrants that market had slowed.

For loans that do not meet the 20 percent equity criteria, Kiwibank's two-year rate is 9.19 percent and the three-year rate 8.99 percent.

The bank also dropped its one-year rate, which does not have the 20 percent equity requirement, by 0.11 percent to 9.29 percent, while its four and five-year rates are both down 0.06 percent to 8.99 percent.

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