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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2004/7 30 April 2004

Welcome to the seventh Cairns Lockie Mortgage Commentary for 2004. 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 30 April 2004) the money markets were at the following levels:

Official cash rate 5.50% (up from 5.25)

90 day bill rate 5.78 (up from 5.56)

1 year swap rate 6.01 (up from 5.78)

3 year swap rate 6.31 (up from 6.15)

10 year bond rate 6.17 (up from 6.09)

Kiwi dollar 0.6225 (down from 0.6355)

Mortgage Rates - Which Direction?

Yesterday the Reserve Bank increased the Official Cash Rate (OCR) by a quarter of a percent to 5.50%. Floating rate mortgages will increase by this amount and fixed rates will increase as well. The Reserve Bank cites as reasons; inflationary pressures within the economy, some instability with our currency, and the on-going strength in the housing market. As one economist said, "this is all pretty confusing". NZ has the highest cash rate of all the OCED countries, with Australia at 5.25%, USA at 1.0%, UK at 4.0% and the European Central Bank at 2.0%. Is our economy so much more robust, than say Australia or the United Kingdom? We think not, and the decision to raise our Official Cash Rate is hard to justify.

Auckland Apartments - More Choices

With new projects being completed the total number of apartments now in Auckland, (not including Newmarket) is around 8,500. According to Bayleys' March newsletter 4,570 apartments are under construction and a further 3,200 are proposed. This is well up on the stock of just over 1,000 in 1994. The apartment market is starting to reach a degree of maturity here in Auckland and purchasers of this form of accommodation are starting to be offered a real choice in terms of price, construction and quality.

Building Costs are Rising

One of the reasons for higher housing prices is that building costs have been rising. Residential construction costs have risen nearly 10% in the last 12 months. This is due to a skills shortage within the building industry, changes in the building regulations, (with the leaky building syndrome) and more conservative and expensive building techniques being adopted. The latest figures available from the Building Industry show the cost per square metre for the average Wellington house has increased from $1,086 in the middle of 2002 to $1,164 in 2003.

Another Kiwi Bach Sells for Nearly a Million

A modest 92 square metre bach on a 1083 metre section recently sold for $980,000. It was located right on the beach at Pukehina in the Bay of Plenty. According to the real estate agent, it was a relatively modern typical Kiwi bach, nothing spectacular, but with the waves lapping just 30 metres away. Property purchasers are showing a continued high interest in coastal properties,.

Our current mortgage interest rates are as follows

Variable rate 7.15%

No Financials Home Loan 8.15

Jumbo Loan 7.15

Quick Start Home Loan 6.75

One-year fixed rate 7.06

Two-year fixed rate 7.27

Three-year fixed rate 7.39

Five-year fixed rate 7.51

Line of credit facility 7.25

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