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The nation’s main mortgage lenders are engaged in a battle to attract home buyers on expectations that the economy will improve.

The central bank’s lower benchmark rate — down 3 percent in the past 10 months — and the agreement of 14 major lenders to lower their deposit rates have given lenders the opportunity to cut mortgage rates.

It’s an opportunity some lenders are aggressively pursuing.

PT Bank CIMB Niaga, the country’s second-largest mortgage lender, has trimmed its average mortgage rate to about 10 percent, down from 15 percent at the start of the year.

The rate is fixed for six months, at which time it is replaced by a floating rate.

The lender is also offering special rates to preferred depositors, including zero percent to customers whose deposits total 147 percent of the value of the mortgage, said Sihaimin Djohan, CIMB Niaga’s director of retail banking.

The bank, which says it has about 10 percent of the national market for home loans, has disbursed Rp 1.4 trillion ($141 million) in new mortgages since January and is optimistic it can book Rp 3.5 trillion for the year. Last year, it had Rp 13 trillion in outstanding mortgage loans.

“We’re optimistic about the mortgage market because the economy is in better condition and rates are lower,” president director Arwin Rasyid said.

Meanwhile, PT Bank Tabungan Negara, the nation’s largest provider of home loans, has capped its mortgage rate at 9.9 percent through Nov. 30.

BTN’s president director, Iqbal Latanro, said the bank was confident it would meet its target for new mortgages this year.

Iqbal said BTN had Rp 12 trillion in outstanding mortgages. He said it expected to increase its total to anywhere from Rp 15 trillion to a robustly optimistic Rp 25 trillion by the end of the year.

“Consumer demand for home loans is growing,” he said.

PT Bank Central Asia, meanwhile, has offered a special fixed rate of 9.9 percent for three years to customers who have been depositors for at least two years. Standard rates are 11 percent to 12 percent.

As of the end of August, BCA had booked Rp 2.8 trillion in new home loans this year and had outstanding loans of Rp 11 trillion.

“We are optimistic with four months remaining because we already have a lot of mortgage lending in the pipeline,” said Henry Koenaifi, BCA’s managing director. “Previously, we had a pessimistic outlook for this year, but now we’re optimistic that we can reach Rp 4 trillion in new mortgages, up from our earlier projection of Rp 3 trillion.”

Many economists expect the central bank to begin raising rates in the first quarter of 2010.

But Nathalia Sutanto, a property analyst from PT Ciptadana Sekuritas, said a moderate increase may not hurt the property market.

“Even if the lending rate is raised slightly, developers could still be aggressive in attracting new buyers,” she said.