Photo: RNZ
BNZ will no longer charge first-home buyers and other low-equity borrowers a higher interest rate.
The bank said on Tuesday that as well as cutting home loan rates - its one-year rate is now 6.55 percent - it was moving to a single set of home loan fixed interest rates.
Previously, it offered "standard" and "classic" rates - classic rates were available to people who had more than 20 percent equity in their properties. BNZ said the classic rate had interest rates that were 60 basis points lower.
Now, borrowers with less than 20 percent equity will be able to access classic rates, although they will still be charged a low-equity premium.
This premium ranges 150bps for borrowers with deposit of less than 5 percent through to 35bps with those between 15 percent and 20 percent.
BNZ executive customer products and services Karna Luke said the changes would make a real difference.
"The simpler home loan rates mean that all customers will be able to access our best home loan rates, even if they don't have 20 percent equity. For example, a first-home buyer borrowing $500,000 with a 15 percent deposit on a 30-year term would save $78 per fortnight based on the current one-year fixed rate advertised on the BNZ website. Over a one-year fixed term, this amounts to savings of more than $2000."
The new pricing takes effect from Tuesday for new customers and existing customers when they refix.
Mortgage broker Jeremy Andrews, from Key Mortgages, said the move made sense.
"With rates dropping and house prices having come down, we're seeing renewed interest - with most clients now expecting sale prices to be rising in near future. As house prices increase, this further reduces the risk to the bank for low-deposit lending so why not encourage this by offering more competitive rates in line with several other lenders in the market?
"Another anomaly of BNZ compared to other banks was if choosing the 'classic rate' over 'standard rates' there were more penalties for increasing your repayments during a fixed term. All banks have slightly different options on this but it's great to see BNZ offering more flexibility here - BNZ's standard rates allow you to make up to 5 percent extra principle repayments per annum from the refix date, via either lump payments and/or increasing repayments."
He said there were more options now for people with small deposits.
"This change from BNZ helps affordability here too - in many first-home buyer scenarios now with 5 percent to 10 percent deposit, we are now negotiating even sharper interest rates than compared to those buying early this year with the typical sweet spot of 20 percent."
He said the "standar" rates offered Fly Buys but that was not much of an incentive when the rates were higher.