Cairns Lockie Mortgage Commentary
Cairns Lockie Mortgage Commentary
Issue 2003/8 16 May 2003
Welcome to the eighth 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 http://www.emortgage.co.nz/newsletters.htm
The Money Market
This morning (8am on 16 May 2003) the money markets were at the following levels:
Official cash rate 5.50% (unchanged) 90 day bill rate 5.45 (down from 5.51) 1 year swap rate 5.17 (down from 5.30) 3 year swap rate 5.50 (down from 5.60) 10 year bond rate 5.60 (down from 5.83) Kiwi dollar 0.5735 (up from 0.5630)
New Zealand's Mortgage Rates are Still Too High
Last month the market was taken by surprise when the Governor of the Reserve Bank lowered the Official Cash Rate by a quarter of a percent. Most lenders, including ourselves, reduced floating mortgage rates by the same amount. Our OCR is 5.25% and is still one of the highest in the western world. In Australia the rate is 4.75%, United Kingdom 3.75%, Canada is 3.25% and the USA is 1.25%. Our economy is not doing all that much better than these countries, our inflation is under control (in fact is lower than Australia's), and the outlook for the world economy is still sluggish. There is no reason that our Official Cash Rate should not be at the Australian level of 4.75%. This means floating rate mortgages would fall by up to another three quarters of percent, to range of between 6.50% to 6.85%.
Strong Property Market Continues
House sales volumes have been strong but how strong? For the year ending 2002 there were 10,100 residential property sales in the whole country. This was well up in the 2001 year where 7,700 sales were recorded, and again higher than the previous year at 6,600. Increased volumes are associated with a buoyant market where prices are firm and the population confident. The last recorded year with similar characteristics was 1996, when nearly 9,000 dwellings changed hands. The outlook continues to be positive. Immigration remains strong and floating mortgage rates look set to decrease by a further half to three-quarters of one percent.
Non Conforming Loans Fill a Real Need
One aspect of the market that has developed rapidly over the past two years is the non-conforming mortgage market. This sector caters for people who are unable to obtain a mortgage due to say current credit problems, a business failure, or divorce. At Cairns Lockie we have been active in this market as well as in the prime market. With a non-conforming mortgage you may pay 1 - 3 % more in rate but at least you can get started in your property activities (or saved from an adverse situation). If all commitments go according to plan we can look at refinancing you into a prime rate mortgage within a couple of years. If you have some credit issues but would like a mortgage, then give us a call - you would be surprised at the number of people we can assist.
Banking and Finance Sectors Going Well
Last week KPMG, Chartered Accountants, released their Financials Institutions Performance Survey for 2003. This provides a good insight into the NZ banking and finance scene. The report notes that the banking sector is performing well, particularly on the back of the strong mortgage market. The finance company sector is expanding rapidly with a large number of new entrants, and strong asset growth. Some consolidation and rationalisation has occurred such as the sale of AMP Banking, S H Lock and Diners New Zealand. The overall comment is that this sector remains robust and profitable. If you would like a copy visit http://www.kpmg.co.nz/apps/core.kpmg/download.jsp?id=101373
Our current mortgage interest rates are as follows
Variable rate 7.25%
No Financials Home Loan 8.25
Jumbo Loan 7.25
Quick Start Home Loan 6.10 (new)
One-year fixed rate 6.41 (new) Two-year fixed rate 6.62 (new) Three-year fixed rate 6.79 (new) Five-year fixed rate 7.01 (new)
Line of credit facility 7.35