The mortgage market is in for a shake-up after the Government's decision to further back Kiwibank.
Several hundred million dollars of new capital will be put on standby for the Kiwibank in the case of severe shock that neither the bank nor its parent New Zealand Post can cover.
The capital should bolster Kiwibank's credit rating and make it easier to borrow offshore.
Chief executive Sam Knowles says up to $500 million of new overseas borrowing is planned to support new lending to customers.
A spokesperson for financial website goodreturns.co.nz, Philip Macalister, says the move should increase competition in the home loan market and lower interest rates.
Kiwibank has also said it wants to boost competition in the business lending market.
Meanwhile, Mr Knowles has confirmed that Kiwibank doesn't intend to sign up to the extended Crown retail deposit guarantee scheme when it starts in October.
Meanwhile, New Zealand Post's chief executive, Brian Roche, says it hopes to announce a replacement for Mr Knowles in the next few weeks.
Sam Knowles announced his resignation in May, but is staying on until a replacement is found.
Mr Roche says the leading candidates for the job are all New Zealanders.