The new "special" rate is the lowest offered by HSBC, and prices level with Heartland Bank's digital mortgage.
The Co-operative Bank's 2.09% one year rate follows closely behind.
HSBC said the new rates continued the bank's "consistent track record of offering very competitive mortgage rates to customers in the New Zealand market".
"Whether you’re looking to buy a new home or simply to refinance your existing home loan, our market-leading mortgage rate of 1.99% pa could help you achieve that goal," said Martine Milicich, head of wealth and personal banking at HSBC New Zealand.
The bank's offer is limited to HSBC Premier customers, however.
Borrowers qualify for Premier if they earn $125,000 individually or jointly with another account holder.
They can also qualify if they have a "total relationship balance" of $100,000, or a mortgage greater than $500,000.
This latest special rate is available to new Premier customers and existing customers who borrow more than $100,000. Minimum deposit and equity criteria apply.