The third biggest bank of New Zealand, Westpac has specified that it is ready to lend to home-buyers with less than a 20% deposit - but at a cost.

This week saw the commencement of an advertisement campaign by the bank, in which it proposed to lend over 80% of the value of a house to people wanting to live in the house.

The offer might come with higher interest rates, says Spokesman Craig Dowling, who added that buyers with a 15% deposit would pay 0.25% above the standard interest rate, and buyers with only a 10% deposit would pay a 0.5% premium.

Buyers would need to pay 6.25% interest with a full 20% deposit, 6.5% with a 15% deposit or 6.75% with a 10% deposit, based on the bank's present two-year fixed mortgage rate.

According to Mr. Dowling, more money has been attracted by Westpac from competitive interest rates for bank deposits. Mr. Dowling, who believed that house prices were settling, concluded: "Many would-be home-buyers wrongly believed they would need to reach the 20% level."