Cairns Lockie Mortgage Commentary 17 August 2001

Cairns Lockie Mortgage Commentary

Issue 2001/15 17 August 2001

Welcome to the fifteenth 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 17 August 2001) the money markets were at the following levels:

Official cash rate 5.75% (unchanged)
90 day bill rate 5.85 (up from 5.82)
1 year swap rate 6.03 (up from 5.96)
3 year swap rate 6.76 (up from 6.69)
10 year bond rate 6.60 (down from 6.62)
Kiwi dollar 0.4327 (up from 0.4185)

Economic Comment - Hawkish

As many commentators were predicting, the Reserve Bank Governor, Don Brash left the Official Cash Rate (OCR) unchanged. On the domestic front, the Governor acknowledged that inflation was running close to 3% and that this was starting to push up some wage settlements. The rural sector was at its best for a number of years and our economy may be close to operating at full capacity. On the negative side the slowdown in the USA, Japan and Europe maybe more prolonged that previously anticipated.

Our view is that the Governor may be being a little optimistic on the NZ scene. We believe, with reference to the Auckland property market, that there will need to be considerable improvement, before it can be said to be buoyant. Houses are selling more easily now than a year ago, but we have seen little in the way of positive price movements.

Banks Really Are Stupid

We came across a really stupid situation earlier this week. We received a bank cheque issued by the BNZ. We wanted to draw on it immediately through our business account, which is also with the BNZ. We were told that we had to wait the usual five days for it to clear, as if it was an ordinary cheque. Further enquiry revealed that banks have tightened up on bank cheques, due to a considerable increase in the amount of fraud involving them. This is not acceptable. The banks should be devising ways to protect themselves from fraud, which do not inconvenience the poor bank customer. On top of that, they will charge you for a special answer on one of their own bank cheques. The lesson for the general public is that "YES" a bank cheque can be dishonoured and it is not immediately cashable. This has implications for individuals selling cars and other household items, who believe that a bank cheque is as good as cash. It is not, so why pay for one.

Interest-Only and Capitalising of Your Interest

Two mortgage products that are being requested, particularly by property investors, are interest-only and capitalised interest. We offer both five and ten year interest-only products. The best way to capitalise your mortgage payments is to choose our line of credit facility. You then apply for more than your current loan requirement, i.e. your current amount required plus the equivalent of say twelve months' interest. You can drawdown each month and meet your usual interest payments. This allows you to preserve your cashflow.

We are the Only One

Cairns Lockie is fast becoming a one shop mortgage company. We continue to offer prime first mortgages at below bank rates. We are now offering first mortgages under our General Finance Limited brand. This company also offers second mortgages. We now have a contributory mortgage company offering a deposit facility to investors and this vehicle offers first mortgage finance as well. We continue to source mortgages over the internet through our emortgage site. If you have a mortgage enquiry with a residential bias, please do not hesitate to contact us.

Our current mortgage interest rates are as follows

Variable rate 7.40%
No Financials Home Loan 8.40
Quick Start Home Loan 6.69
One-year fixed rate 7.10
Two-year fixed rate 7.50 (new)
Three-year fixed rate 7.79 (new)
Five-year fixed rate 7.99 (new)
Line of credit facility 7.75

Regards William Cairns James Lockie

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