Cairns Lockie Mortgage Commentary 30 March 2001

Issue 2001/5 30 March 2001

Welcome to the fifth Cairns Lockie Mortgage Commentary for 2001. This is a fortnightly electronic newsletter which aims to keep you informed on developments at Cairns Lockie, Mortgage Bankers and the mortgage market in general. Previous issues of this commentary can be found on our website http://www.emortgage.co.nz/newsletters.htm

The Money Market

This morning (9am on 30 March 2001) the money markets were at the following levels:

Official cash rate 6.25% (unchanged)
90 day bill rate 6.22 (unchanged)
1 year swap rate 5.90 (up from 5.80)
3 year swap rate 6.20 (up from 6.00)
10 year bond rate 6.00 (up from 5.88)
Kiwi dollar 0.4110 (down from 0.4113)

Improving Housing Data

Although house sales from March 2000 to February 2001 were the lowest since 1992, there are positive signs emerging in the real estate markets. Sales, month on month, have started to improve. Monthly seasonally adjusted growth over the past four months has been four percent, six percent, ten percent and eight percent respectively. Several real estate commentators are expecting to see a rebound in the housing market this year. This is being helped by the recent fall in mortgage rates and some likely further decreases to come, rising consumer confidence and lower unemployment levels.

Where Are Wholesale Interest Rates Going?

Q: When will floating rates decrease again? A: Only when the Official Cash Rate (OCR) is reviewed by the Reserve Bank. Q: By how much? A: A number of institutions in the wholesale financial markets (including Macquarie Bank, Westpac, Deutsche Bank) have projected decreases in the OCR within the next three months. All of them, said they expect to see the OCR move by at least 0.25% and some said by up to 0.50%. This implies that floating mortgage rates may move up to 0.5%. Our floating rate will then be around 7.5%.

Peoples' Bank Again, are there Alternative Models?

The Peoples' Bank is coming. The establishment decision was rushed, to say the least, and alternative options have received little comment. One successful model is being promoted by the Bendigo Bank in Victoria, Australia. It works as follows: a local entity, (say a community trust or some other type co-operative venture), raises some funds and forms a company. This company purchases from the Bendigo Bank the right to run a banking branch to offer full services. The community organisation then runs the venture. In a small rural town it maybe done with volunteers but in larger areas a paid staff is employed.

To date there are now thirty-five of these community ventures. They operate much like a McDonalds or a KFC franchise and everyone benefits. Bendigo Bank is able to distribute more products, the local community obtains a banking outlet, which it would not have had, and profits can be reinvested back into the community.

New Initatives from Cairns Lockie - Nominee Lending

We have been busy over the past few months developing some new products and services. The first of these is our nominee company. This will operate exactly the same way as the solicitors nominee companies. We will advertise for retail funds we will pool these and then lend the funds out on individual mortgages. This facility will offer numerous advantages. It will enable us to advance funds on propositions, which are bankable, but for various reasons we are currently unable to proceed with. A number of these propositions are in fact semi-commercial and as residential lenders until now, we have been unable to do them. For our investors it will offer a yield enhancement over current fixed rate investments. We are expecting to pay somewhere around 3.0 to 3.5% above the current two-year government stock rate. If you have any further questions or funds to invest, please give us a call.

Further developments will be advised over the next few weeks.

Our current mortgage interest rates are as follows

Variable rate 8.00%

Quick Start Home Loan 6.79 (scorcher)
One-year fixed rate 7.20 (new)
Two-year fixed rate 7.15 (new)
Three-year fixed rate 7.25 (new)
Five-year fixed rate 7.40 (new)

Line of credit facility 8.35

Regards William Cairns James Lockie

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