ASB has become the latest bank to reduce its one-year fixed home loan rate to 5.25%, down from 5.7% to match the Westpac and ANZ-National Bank rate for the same period.
Kiwibank set off the latest round of cuts at the end of last month, setting a one-year fixed special rate of 4.99%.
Mr Loan said the Kiwibank move was "quite aggressive" and he suspected other banks had moved their one-year rates down as a result.
"It will get to a point at some stage when interest rates will go up. From a customer's point of view, to lock in some of the lending in the long term has a benefit.
"At SBS, we are aggressive on long-term rates and made the decision to offer three and five-year specials. The problem with short-term rates is that if you lock in one now for one year, you could miss opportunities on a three and five-year term when you come back into the market."
Mr Loan believed it made more sense staying with the floating rate, which was so close to a one-year fixed rate, than locking in for only 12 months.
SBS offered 5.65% mortgages to customers on a floating rate through to a three-year terms.
The Invercargill-based bank offered the same rates to all customers, not providing incentives for new customers at the expense of its existing ones, he said.
SBS customers were the bank's owners and SBS felt obliged to provide the benefits to existing as well as new customers.
The bank's five-year term was 5.99%.
Asked about changes to the way banks needed to fund their lending capital, Mr Loan said that from January 1 next year, banks would need to find 75% of their "core funding" nationally, rather than relying on overseas borrowing.
In the trade, that sort of equity was called "sticky money" and retail deposits were the best sources for sticky money. That could lead to stiff competition on deposit rates.
SBS was already funding its lending 100% from its own resources.
Some banks were starting to issue bonds, particularly in Europe, to source more of their own lending money, he said..
New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said while Kiwibank offered the lowest one-year rate, customers needed a higher level of equity than required by other banks.
Kiwibank required 30% equity while a normal mortgage was 20%.
He recommended people shop around as the record low rates indicated a favourable time for borrowers.
People would be able to reduce their debt under lower rates.
"We have been borrowing a lot of money leading up to 2007-08 and we have accumulated a huge amount of debt. It's now time to pay it down."
