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Cairns Lockie Mortgage Commentary

Issue 2002/9 31 May 2002

Welcome to the nineth Cairns Lockie Mortgage Commentary for 2002. 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 31 May 2002) the money markets were at the following levels:

Official cash rate 5.50% (unchanged)
90 day bill rate 5.87 (unchanged)
1 year swap rate 6.56 (down from 6.58)
3 year swap rate 6.92 (down from 7.07)
10 year bond rate 6.74 (down from 6.87)
Kiwi dollar 0.4772 (up from 0.4610)

Long Dated Rates are Easing

Over the past two weeks, medium and long dated fixed interest rates have decreased by 10 to 15 basis points. While prima facie this may not appear significant, it suggests that future short-term interest rate rises may smaller than we thought. Our currency has been markedly stronger over the past two months. This in itself is a form of monetary tightening. Export incomes will decline and imported inflation will be lower. This is positive news for mortgage rates with reduced pressure for future rate rises.

Lots of Houses in Auckland

Auckland continues to grow. Over the past 10 years (1991 - 2001) 78,000 new residential dwellings have been built. There are a number of trends emerging: · The size of dwellings has increased substantially by 40m2. This is despite the fact that four out ten new dwellings are either a flat, apartment or a townhouse. The average dwelling size is now over 200m2. · The fastest growing areas have been Howick, Albany, and Manurewa. · About half of this growth has occurred in existing urban areas rather than green fields developments. The city is therefore getting denser, and urban intensification is occurring. · Over that period around 40% of all new dwellings being built were in Auckland.

Less Risk of a Bust in this Boom

Some commentators, particularly in Auckland, are starting to say if house prices surge, then this may be followed by a bust, particularly if mortgage rates rise by a further few percent. We do not agree. Most borrowers are now factoring into their calculations, the possibility of mortgage rates rising a little. Mortgage lenders are doing this as well. The housing market in Auckland is being driven on pretty sound fundamentals including immigration. Migrants are also coming from a variety of destinations, there are Kiwis returning from overseas, as well as domestic migration. Growth prospects look reasonably robust for the country at the moment with up to three percent being forecasted next year. Retail spending remains strong. Rentals have been firming with agents noting that demand is continuing to be good. Housing is still being seen as an attractive investment class. All these factors point to a positive outlook for house prices.

Property Investors Get Better Serviced

How do residential property investors ensure that they are getting good tenants? One tool that is available, with which a number of property investors are unfamiliar, is the credit check. A credit check will give you an indication on who the potential tenant has been borrowing from, but more importantly it will tell you if they are meeting their commitments on time. A clean credit report is a very good indicator of whether an individual is meeting their current obligations. To find out more information you can call Baycorp Advantage on 0800 229 267.

Our current mortgage interest rates are as follows

Variable rate 7.35% (new)

No Financials Home Loan 8.35 (new)

Quick Start Home Loan 7.45

One-year fixed rate 7.76
Two-year fixed rate 8.02 (new)
Three-year fixed rate 8.19 (new)
Five-year fixed rate 8.36 (new)

Line of credit facility 7.45 (new)


Regards William Cairns James Lockie


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