Low equity borrowers who take a home loan with Westpac will pay around 0.6 percentage points more interest per annum on loans compared to those with more than 20 per cent equity.

The bank this morning announced it had split all its rates depending on whether the borrower has more or less than 20 per cent equity.

Low equity borrowers will pay 6.55 per cent per annum fixed over two years compared to the standard rate of 5.95 per cent per annum.

Ian Blair, general manager retail at Westpac, said it was making the move in response to the Reserve Bank's lending cap.

From October 1 the Reserve Bank capped the amount of new lending banks can do to low equity borrowers to 10 per cent.

Blair said splitting the rates would help make it easier for people to assess what options were available to match their circumstances.

The bank also announced a cut to its standard floating rate to 5.64 per cent for those with 20 per cent or more equity and who get their salary paid into a Westpac account.
The rate is 11 basis points lower than its choices floating rate of 5.75 per cent and 60 basis points lower than its standard rate of 6.24 per cent.

Blair said as conjecture on when the official cash rate might move continued, more customers were looking at their options and breaking up their loan to take advantage of rate certainty (fixed) and repayment flexibility (floating).

"Our new floating rate is highly competitive and offers customers who are now considering splitting their home loans between fixed and floating real value," Blair said.

The bank says its rate is market leading. According to Interest.co.nz it is 1 basis point lower than Kiwibank's 5.65 per cent floating rate.