Westpac is keeping the pressure on its competitors with its lowest ever interest rate.

The bank announced today a mortgage rate at 2.29 per cent - the lowest currently offered by any of the big four banks.

There is, however, a catch in that the special rate is only available on a one-year fixed term for customers with 20 per cent equity in owner-occupied homes.

Westpac NZ general manager of consumer banking and wealth Gina Dellabarca noted how this rate compared to previous years.

"Two years ago the same special home loan rate over the same term was 4.15 per cent," she said.

"It would have cost $1119 a fortnight to service a $500,000 mortgage over 30 years. Now, the lower interest rate means the same repayment would be $885 a fortnight – a saving of $6084 over a year."

Dellabarca says the one-year rate is currently the bank's most popular rate.

"We assisted first home buyers into more than 5300 new homes in the 12 months to September 2020, a 7 per cent increase on the previous year with many accessing their Kiwisaver first home-buyer withdrawal option to help them with their deposit."

While the 2.29 per cent rate is the lowest among the major banks, it is not the lowest when smaller players are also taken into consideration.

Heartland Bank is currently offering a one-year rate at 1.99 per cent. This, the first sub-2 per cent rate in New Zealand, was first released in October last year and is available only to customers refinancing or buying a standalone house on a single section, have a deposit or equity of at least 20 per cent - and intend to live in the home.

With its current fixed one-year rate of 2.25 per cent, HSBC is also offering a better rate than that released by Westpac today.

While low interest rates can be appealing, homeowners are advised to first check with their bank or mortgage broker to find out if the associated break fees make the savings worthwhile.

The low rates currently on the market come at a time of growing concern about the state of the property market in New Zealand.

REINZ data showed Auckland median house prices hit $1 million for the first time in October last year, and the national median shot up 19.8 per cent from $605,000 last year to $725,000.

And those high prices have done little to dampen buyer enthusiasm as in November the highest number of houses were sold since March 2007.

Economists are now predicted that house prices could rise by as much as 13 to 16 per cent in the next few months.

This will only put further pressure on the many Kiwis currently locked out of the housing market with homeownership rates at the lowest level since 1951.

Rapidly increasing house prices also have repercussions for those on the property ladder, with data from credit agency Centrix showing that nearly one in five over-65s still has a mortgage.