Westpac's two year special rate falls by 36 basis points, putting it level with ASB's special, launched last week.
Heartland Bank's 2.97% online mortgage remains the cheapest two year term on offer in the New Zealand market.
Westpac's sharp two year rate comes as the bank also cuts three, four, and five year specials by 30 basis points.
The bank's three year rate is now 3.39%, four year is 3.49%, and five year is 3.59%.
The five-year loan is the second cheapest in the market behind China Construction Bank's 3.45% offer.
Westpac's new rates come into effect on Wednesday.
Following the Westpac cuts, BNZ is now the only big four lender without a sub 3% offering.
The price war comes after ASB and Kiwibank launched sub-3% offers last week, and TSB and ANZ went below 3% on Monday.
Economists expect further downward pressure on wholesale rates and the official cash rate.
The Co-operative Bank has also cut mortgage rates, effective on Wednesday.
The Co-operative's six-month and one year specials fall to 3.09% from 3.25%, while its two year is cut to 3.35%.
Take a look at the latest rates in the market here.