Cairns Lockie Mortgage Commentary - 17 Sept 2004
Fri, 17 Sep 2004
Cairns Lockie Mortgage Commentary
Issue 2004/17 17 Sept 2004
Welcome to the seventeenth 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 17 Sept 2004) the money markets were at the following levels:
Official cash rate 6.25% (up from 6.00) 90 day bill rate 6.68 (up from 6.55) 1 year swap rate 6.75 (up from 6.66) 3 year swap rate 6.69 (up from 6.68) 10 year bond rate 6.16 (down from 6.20) Kiwi dollar 0.6586 (up from 0.6456)
Cairns Lockie Expands Product Range With Another Wholesale Funder
Cairns Lockie Limited is termed a non-bank lender as we rely on wholesale providers for our funding. Twenty years ago a company such as ours would have operated exactly like a Building Society, relying on retail deposits. Today we use wholesale funders to give us access to the depth of funding that only the wholesale market can provide.
wholesale funder, to date, has been AMS (NZ) Limited an Australian wholesale funder. From this week we have an additional funder, Origin (NZ) Limited, a wholly owned subsidiary of the ANZ Bank. We welcome our additional funder as it will enable us to add several new mortgage products to our current range. It is our aim at Cairns Lockie to have one of the most extensive ranges of residential mortgage offerings in the market. We are nearly there and have some more developments coming.
What is New
With an additional wholesale funder on board, our product offering has increased and this will be revealed over the next few weeks. Here are three: " Our maximum exposure on a single dwelling was $750,000. We have now increased this to $2,000,000 (or beyond depending on the transaction). The borrower still has to show they can service that amount. " Increasing our exposure to individual borrowers over several properties from around $1.0 -1.5 million to around $3.0 -3.5 million. This is important as it enables us to advance more funds to a number of our existing clients. " Greater latitude to lend on a number of residential properties including lifestyle blocks and inner city apartments. We welcome your enquiries.
First Home Buyers Have It Tough
One of the unseen consequences of mortgage increases is that it is making harder for first home buyers, particularly those with a single income. Six months ago, a first home buyer was able to borrow at around 7.0%, but now the rate has increased to 8.5%. On a $200,000 mortgage for a 25 year term, repayments will have increased around $200 per month. At the same time houses over the past six months have not dropped in value, they have actually increased, even in a higher interest rate environment.
The Governor of the Reserve Bank, in his move to slow the economy, is actually hurting a group that wants to purchase an owner occupied property. This group is not speculating on rental property, they are not into excessive personal consumption as they are actually saving their deposit, they are an unseen group, being hurt by rising mortgage rates and house prices.
Depreciation Rules May Change
One of the tax advantages of owning residential rental properties is that you can make tax deductible allowances for depreciation. Some are arguing that given properties seldom drop in value, giving an allowance for depreciation does not make a lot of sense. The rates applicable for chattel depreciation for rental properties is similarly under review.
There is an opportunity for the public to have their say. We suggest that concerned property investors make a submission to the Inland Revenue. Submissions close on 30 September 2004. Depreciation is an important issue with property investors. If a hard line is taken it may reduce the numbers willing to invest in this area and may prevent some landlords carrying out improvements, particularly to kitchen and bathrooms which do depreciate over time.
Our current mortgage interest rates are as follows
Variable rate 8.15%
No Financials Home Loan 9.15
Jumbo Loan 8.15
Quick Start Home Loan 7.65
One-year fixed rate 7.96 Two-year fixed rate 7.87 Three-year fixed rate 7.94 Five-year fixed rate 7.96
Line of credit facility 8.25
Regards William Cairns James Lockie