Cairns Lockie Mortgage Commentary 14 May 2004
Cairns Lockie Mortgage Commentary
Issue 2004/8 14 May 2004
Welcome to the eighth 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 http://www.emortgage.co.nz/newsletters.htm
The Money Market
This morning (9am on 14 May 2004) the money markets were at the following levels:
Official cash rate 5.50% (unchanged) 90 day bill rate 5.90 (up from 5.78) 1 year swap rate 6.20 (up from 6.01) 3 year swap rate 6.44 (up from 6.31) 10 year bond rate 6.35 (up from 6.17) Kiwi dollar 0.6090 (down from 0.6225)
Combination Loans - Get Them Here
A term that is becoming more widely used in the mortgage sector is that of a combination mortgage. The interesting thing is that it often means different things to different lenders: " a portion fixed and a portion floating " a part fixed for 1 year and part fixed for 5 years " a mortgage with a line of credit attached " a split mortgage over a borrower's residence with one split being used to fund a rental property and so tax deductible or " a first and second mortgage In fact a combination mortgage can be any of the above. It is essentially a mortgage that allows a borrower to achieve more than one purpose. At Cairns Lockie we offer a full range of combination mortgages in all the above categories.
Who Is Buying Inner City Auckland Apartments?
Over the next 12 months nearly 5,000 new inner city apartments will come on the Auckland market. This is on top of the existing supply of nearly 8,000. This begs the question who is buying all these apartments. Recently Bayleys Real Estate has undertaken some research to obtain a snap shot of these buyers: " Around 60% are being purchased by resident buyers and the remaining 40% by offshore parties. " Fairly evenly split between owner occupiers at 55% and 45% for investors. " Those in their 40's are the largest purchasing group, followed by those in their 30's, then their 50's. " More couples are purchasing apartments than single people These results are interesting as many people think most apartment purchasers are young, single and investors. This is not the case.
Mortgage Rates Across the Ditch
Currently our Official Cash Rate is 5.50% and in Australia it is 5.25%. As this is the main funding mechanism for determining mortgage rates you would expect them to be a little lower in Australia than here. This is the case. The average bank floating rate in New Zealand is 7.75% and in Australia it is 7.07%. The average two year rate in NZ ranges from 7.30% to 7.55%, whereas in Australia the range is from 6.60% through to 7.75%. The big difference between the two markets is that our rates are much more bunched together. Nearly all our prime floating rates range from 7.40% to 7.75% - a range of 35 points. In Australia the range is from 6.49% through to 7.07%, a difference of 58 points. The same is true for fixed rates.
Are We Paying Too Much for our Mortgages?
Some may believe that because we have the highest mortgage rates in the OECD countries, our lenders must be earning the highest margins. The recent KPMG, 2004 Financial Institutions Performance Survey show this is not the case. Margins for the major bank lenders in various countries for 2003 are
NZ 2.65% Australia 2.66% U.K 2.21% USA 3.25% Canada 2.07%
We are right on a par with Australia, which is the easiest country to compare ourselves with, higher than the UK and Canada, but lower than the USA. The full report can be obtained from KPMG at http://www.kpmg.co.nz/apps/core.kpmg/browseExtend.jsp?id=101902
Our current mortgage interest rates are as follows
Variable rate 7.40%
No Financials Home Loan 8.40
Jumbo Loan 7.40
Quick Start Home Loan 6.95
One-year fixed rate 7.26 Two-year fixed rate 7.47 Three-year fixed rate 7.59 Five-year fixed rate 7.71
Line of credit facility 7.50