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The Money Market

The Money Market

This morning (8am on 27 June 2003) the money markets were at the following levels:

Official cash rate 5.25% (unchanged)

90 day bill rate 5.25 (unchanged)

1 year swap rate 5.04 (up from 4.95)

3 year swap rate 5.30 (up from 5.13)

10 year bond rate 5.28 (up from 5.06)

Kiwi dollar 0.5850 (up from 0.5790)

Further falls in Mortgage Rates Likely

Again interest rates have dominated the financial pages this week. The big news is that the Federal Reserve in the United States has lowered their overnight cash rates to 1%. These are the lowest wholesale rates since the mid 1950's. The reason for this decrease is the still sluggish USA economy. With the global scenario favouring lower cash rates, it is likely the Governor of our Reserve Bank will lower the cash rate next month and maybe twice more this year. As a result all the movement in interest rates will occur at the short end of the yield curve: floating rates will go lower. Soon floating rates will be lower than the fixed rates.

House Sale Volumes

House sales are traditionally slow during the winter months. This has not been the case this year. In May there were 11,158 dwellings sold. This was up from 9,047 in April and 10,747 in March. The Auckland area was particularly active with 4,005 house sales in May, up from 3,009 in April and 3,268 in March. All this activity has pushed the median price of a dwelling, nationally to $210,000. This is up over 11% from $188,000, at the same time last year. According to a number of real estate agents June is looking to be another good month. House sales are no doubt being assisted by the low mortgage rate environment and with the likelihood of further rate decreases over the coming months.

Mortgage Rates in the United Kingdom

In our last newsletter we discussed mortgage rates across the Tasman, with floating rates there being around one percent lower than in this country. In the United Kingdom mortgage rates are lower than in both New Zealand and Australia. Why is this? Basically it is to do with the Official Cash Rate. In New Zealand this is currently at 5.25%, Australia it is 4.75% and in the UK it is at 3.75%. The mortgage rates in the United Kingdom are in a narrow band with average floating rates around 5.3% and one to three year fixed rates at around 4.8%. There are a number of specials being offered at around the sub 5% mark as well.

Ghost Town Strikes Gold

St Bathans, a picturesque former gold mining town in Central Otago with a full time population of three, has struck gold again.

At a recent auction of the former school teacher's house, built in 1879, interest was described as strong with bids coming from all over New Zealand.

The stone cottage on 1181 square metres of land was eventually sold for $242,000.

This is more than eight times its rateable value of $28,000. The property was brought by a Central Otago resident, who plans to use it as their holiday residence.

Our current mortgage interest rates are as follows

Variable rate 7.00%

No Financials Home Loan 8.00

Jumbo Loan 7.00

Quick Start Home Loan 5.90

One-year fixed rate 6.21

Two-year fixed rate 6.42 (new)

Three-year fixed rate 6.54 (new)

Five-year fixed rate 6.66 (new)

Line of credit facility 7.10

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