Cairns Lockie Mortgage Commentary

Issue 2001/9 25 May 2001

Welcome to the ninth 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 evening (4pm on 24 May 2001) the money markets were at the following levels:

Official cash rate 5.75% (down from 6.00%) 90 day bill rate 5.81 (up from 5.75) 1 year swap rate 5.93 (up from 5.65) 3 year swap rate 6.67 (up from 6.25) 10 year bond rate 6.70 (up from 6.43) Kiwi dollar 0.4180 (down from 0.4245)

Housing Affordability Improves

Every time mortgage rates decrease, borrowers' affordability ratios improve. Your affordability ratio is determined by your total mortgage payments for the year, over your gross income (expressed as a percentage). A year ago, when bank floating rates were 8.8% a person on an income of $50,000 a year, could have borrowed around $175,000. At our new rate of 7.4% they can now borrow $200,000. This, in effect means, - More potential homeowners can enter the mortgage market. - Those who have kept their repayments at the same level (as rates fell from 8.80% to 7.40%), will have reduced the term of their mortgages from 25 years to 18 years. - You can now increase your mortgage to carry out home improvements or to purchase consumer items.

Cairns Lockie Rate Drop Exceeds OCR Movement

Last week the Reserve Bank lowered the Official Cash Rate (OCR) from 6.00% to 5.75%. This had an immediate effect of reducing all floating mortgage rates. All banks reduced their floating rates by 25 basis points from 7.95% to 7.70%. At Cairns Lockie, in order to give our clients some extra benefit, we reduced our mortgage rates by 30 basis points from 7.70% to 7.40%. This makes our floating rate one of the lowest in the market. We are lower than all the banks and nearly all of the other smaller lenders such as TSB Bank, Sovereign and AMP. Those on a floating rate mortgage with us, have not only enjoyed the flexibility we have had to offer, but have been rewarded with three rate decreases so far this year. We believe that further rate decreases are likely.

Wellingtonians Keen on Inner City Living

Aucklanders are slowly seeing the benefits of apartment living but in Wellington things are more advanced. DTZ Darrochs recently reported there are now 2,600 apartments in Wellington worth around $520 million. In the last twelve months around 220 have changed hands. Prices peaked in 1997 and have eased back around 7 - 9% and most valuers consider that prices have now stabilised. New developments are slowing and buyers are preferring the mid-priced better-quality apartments to the cheaper ones.

The Benefits of an Onshore Wind

One sector that has performed well over the past few years are beach front properties, especially those with unobstructed views, direct access to the water, and near the three largest cities. Demand is strongest, a couple of hours' drive from Auckland but similar demand is being seen on the Kapiti Coast near Wellington. For example, in the township of Omaha, which is an easy drive from Auckland, beachfront properties are selling for around $1,000,000, with properties a few hundred meters back selling for half this amount. So those who bought on the beach several years ago, close to a main centre, may be sitting on a windfall.

Our current mortgage interest rates are as follows

Variable rate 7.40% (new)

Quick Start Home Loan 6.69 One-year fixed rate 7.10 Two-year fixed rate 7.20 Three-year fixed rate 7.50 Five-year fixed rate 7.80

Line of credit facility 8.10

Regards William Cairns James Lockie

Cairns Lockie Limited PO Box 74-212, Market Road, Auckland Telephone (09) 525 9711 Facsimile (09) 579 7795 Website http://www.emortgage.co.nz Email mailto:wcairns@emortgage.co.nz mailto:jlockie@emortgage.co.nz mailto:gslade@emortgage.co.nz mailto:sgasson@emortgage.co.nz mailto:plange@emortgage.co.nz

If you know anyone who may find this newsletter useful we would be happy for you to forward it on.

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