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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2003/4

Welcome to the fourth Cairns Lockie Mortgage Commentary for 2003. 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

The Money Market

This morning (9am on 21 March 2003) the money markets were at the following levels:

Official cash rate 5.75% (unchanged) 90 day bill rate 5.85 (unchanged) 1 year swap rate 5.74 (up from 5.50) 3 year swap rate 6.09 (up from 5.63) 10 year bond rate 6.14 (up from 5.69) Kiwi dollar 0.5530 (down from 0.5650)

First Home Buyers May Get State Help

The Government has recently been talking about assisting first time home buyers purchasing their first home. Back in the mid 1980's New Zealand ranked in the top three in home ownership (world-wide) and now we are at number ten and may well slip past the USA and Canada. With the higher cost of houses and other factors such as student debt it is getting increasingly more difficult for younger people to save the required deposit to purchase a property. The Government is proposing a number of politically correct solutions, but the obvious one is to commence a privatisation process of existing state houses on attractive terms to their owners. This way you get people into their own houses and each house you sell enables the government to built another, without having to obtain extra funding.

Apartment Market Update

There is a trend emerging towards purpose-built apartments rather than conversions. Apartment living is definitely here to stay. It is expected that there will be 4,450 apartments in Wellington by the end of the year and roughly double that number in Auckland. The market is becoming increasingly segmented between luxury apartments (with pools and gyms), standard residential apartments, serviced apartments (catering for short-term stays) and students accommodation. This last one is a rapidly growing segment particularly within Auckland City. If you are buying an apartment it would need to be larger than 45 square metres if mortgage funding is required.

Kiwibank - Will Lose All of Its Capital Within Six Years

Recently Kiwibank announced its six monthly result - a predictably appalling loss of $6.5 million. How can they lose so much? It is not as if most of their branches had to be built from scratch. They were already there to begin with.

If the loss of $6.5 million for the six months to December 2002 was annualised at say $13.0 million for the full year to June, this represents 16.25% of the banks total capital. Continued losses at this rate will mean the banks entire capital of $80 million will be depleted within 6 years.

Their mortgage book of $260 million comes from 280 branches. This means each branch has originated about $0.9 million over the past 12 months. The average mortgage size in this country is roughly $160,000. Is it worth having a branch open that sources around half a mortgage a month?

Million Dollar Houses in Hamilton

Waterfront properties are popular with home buyers at the moment. A similar trend is occurring in Hamilton with estate agents reporting a strong and steady demand for quality houses. Recently two luxury homes sold for around a million dollars. A 480 square-metre house on Lake Maungatautari sold for $1.45 million. Another property this time in Hamilton's River Road sold for $980,000. These prices are well ahead of January's median house price for Hamilton of $165,250.

Our current mortgage interest rates are as follows

Variable rate 7.50%

No Financials Home Loan 8.50

Jumbo Loan 7.50

Quick Start Home Loan 6.40

One-year fixed rate 6.71 Two-year fixed rate 6.82 Three-year fixed rate 6.94 Five-year fixed rate 7.11

Line of credit facility 7.60

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