Cairns Lockie Mortgage Commentary 6 August 2004
Cairns Lockie Mortgage Commentary
Issue 2004/14 6 August 2004
Welcome to the fourteenth 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 (8am on 6 August 2004) the money markets were at the following levels:
Official cash rate 6.00% (up from 5.75)
90 day bill rate 6.40 (up from 6.26)
1 year swap rate 6.57 (up from 6.42)
3 year swap rate 6.66 (up from 6.52)
10 year bond rate 6.26 (up from 6.11)
Kiwi dollar 0.6450 (up from 0.6380)
Mortgage Rates Again
Last week the Reserve Bank increased the Official Cash Rate to 6.0% citing our strong economy and the risk to inflationary pressure. We find this strange - why do we have the highest interest rates in the OECD? Is our economy performing all that much better than Australia with a cash rate of 5.25%, the UK at 4.5%, Euroland at 2.0% and the USA at 1.25%? It is interesting that Australia has not increased their rates for the past 3 months whereas we have twice. Their economy is very similar to ours with low unemployment, and high retail sales. As interest rates are a fairly blunt method of controlling the economy there is a real risk of over correcting, pushing our currency to untenable levels and putting NZ into a recession.
Making Housing More Accessible
We read that it is getting harder for younger people to purchase their first home. Younger borrowers tend to have student loans, have deferred their deposit creation with study and houses in the main centres are becoming less affordable. New Zealand, unlike other countries in the OECD, is experiencing a declining home ownership rate. This is leading to an intergenerational wealth gap between older home owners and younger people wanting to purchase a property. An interesting aspect is that many of these older home owners were in fact assisted into their first homes through some form of government assistance such as the capitalisation of their family benefits or through various mortgage schemes with the Housing Corporation. We believe new home buyers do require some form assistance like a few years back. One idea we have, is that an entity like Kiwibank, rather than wasting taxpayers' dollars, competing with existing first mortgage lenders, should be offering say concessionary second mortgages to qualifying first home buyers. This could in effect be the 10% deposit and companies such as ours would lend the remaining 90%. They may have a concessionary rate but the second mortgage will be repaid in full. We feel this would be a real step up for those struggling to purchase their first home.
We Like to Help
One of the pleasant aspects of our business is assisting borrowers into their own homes particularly when their loan requirements are not your typical tick-the-box-vanilla type. We recently helped a Kiwi couple returning from overseas. They quickly acquired well paid jobs but were without the usual 5% deposit. Our 100% Home Loan (no deposit) was ideal for them. The second was an individual who had been in business for two years. Things were just coming right but his income was quite low and no bank was willing to lend. Our No Financials Home Loan, where he was able to self-certify his income, was suitable. Another client was looking at purchasing a rental property but did not have a deposit. They did own their own home. We were able to refinance their existing mortgage as well as funding their rental property. In addition we able to split their mortgages between components that were tax deductible and those that were not.
Prices Firm on the Kapiti Coast
Wellington's Kapiti Coast is currently enjoying strong residential housing market. The demand in housing is just not restricted to the Waikanae and Paraparaumu areas. Recently a 4.04 hectare waterfront lifestyle property at Te Horo was auctioned at more than double its rateable value. This property, located in Sims Road eventually sold for $780,000. It was a standard lifestyle block, with quality fencing and a self contained flat. It also had wide views and on a clear day Mt Egmont was visible.
Our current mortgage interest rates are as follows
Variable rate 7.90%
No Financials Home Loan 8.90
Jumbo Loan 7.90
Quick Start Home Loan 7.35
One-year fixed rate 7.66
Two-year fixed rate 7.77
Three-year fixed rate 7.89
Five-year fixed rate 7.91
Line of credit facility 8.00