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Cairns Lockie Mortgage Commentary

Issue 2001/20 26 October 2001

Welcome to the twentieth 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 26 October 2001) the money markets were at the following levels:

Official cash rate 5.25% (unchanged)
90 day bill rate 5.08 (down from 5.21)
1 year swap rate 5.05 (down from 5.18)
3 year swap rate 5.72 (down from 5.99)
10 year bond rate 6.38 (down from 6.49)
Kiwi dollar 0.4180 (up from 0.4115)

Housing Market Eases a Little in September

After increasing volumes in each of the previous six months, house sales eased in September. Reasons cited are the school holidays and the terrorist attacks on September 11th. Sales numbers declined from 6,976 worth $1.45 billion in August, to 5,604 worth $1.17 billion in September. This is still well ahead of September last year when there were only 5,071 sales. House prices are steady. In September 2000, the average NZ house price was $173,000, the same as it is now. Real estates agents are still optimistic about the housing market, feeling that interest rates are still likely to decrease further.

Interest rates

The Official Cash Rate will be reviewed with the next Monetary Policy Statement on Wednesday 14 November 2001. The market view is that there will be a rate decrease of up to half a percent. This is confirmed by the 90 day bill rate at 5.08%, well below the OCR at 5.25%. Overseas, particularly in Australia and USA, there is a real likelihood of further rate decreases. This should place additional downwards pressure on the New Zealand OCR.

Real is Not Real

Last year, much was made of Real, a real estate venture promoted by a group of lawyers. The company was to offer lower legal and estate agents fees, and was launched with much fanfare. After nine months it was clearly not working and was scaled back. It was relaunched again in Auckland earlier this year but has since folded again. We believe it is now only operating in a few provincial areas, such as Whangarei. The lesson here is that businesses should stick to their core activities. Lawyers should be lawyers, real estate agents should sell houses and mortgage companies should sticking to lending money.

McLeod Tax Review Committee Backs Off Housing Tax

The McLeod Committee received a lot of negative comment three or four months ago when it suggested that there should be a tax on owner occupied housing. In their final report the Committee have backed off this unpopular housing tax proposal. Some good recommendations have remained, such as further simplifying the tax system and lowering the top marginal tax rate back to 33%. Other suggestions included increasing GST and lowering income tax further. These last two are not considered acceptable by the current government.

William Cairns Elected to Auckland City Council

We are delighted to report that William Cairns has been elected to the Auckland City Council, after three years serving as a Community Board Councillor in Hobson. His day job remains unchanged.

Our current mortgage interest rates are as follows

Variable rate 6.90%

No Financials Home Loan 7.90

Quick Start Home Loan 6.12 (new)

One-year fixed rate 6.49 (new)
Two-year fixed rate 6.79 (new)
Three-year fixed rate 7.19 (new)
Five-year fixed rate 7.59 (new)

Line of credit facility 7.25

Regards James Lockie


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