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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2005/1 11 February 2005

Welcome to the first Cairns Lockie Mortgage Commentary for 2005. 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 (8am on 11 February 2005) the money markets were at the following levels:

Official cash rate 6.50% (unchanged) 90 day bill rate 6.83 (up from 6.70) 1 year swap rate 6.88 (up from 6.66) 3 year swap rate 6.74 (up from 6.57) 10 year bond rate 5.98 (up from 5.97) Kiwi dollar 0.7100 (down from 0.7130)

Interest rates and Population

An interesting development over the past two months has been a rebound in the housing market according to a recent ASB Bank survey. This is largely due to, what we believe, is a more stable outlook for mortgage interest rates. It looks as if mortgage interest rates have peaked. In addition a better idea of the likely level of net immigration to this country is emerging. It is expected that new immigrant arrivals will be around 8 -10,000 per year, down from 20 -30,000 in previous years. If we include our natural increase as well as net immigration numbers then our population will grow at just under 1.0%. While this is down from the 1.7% we had enjoyed in 2002 and 2003, we believe that this is still positive for the housing market.

What is Lenders Mortgage Insurance (LMI)

We often get asked what is lenders mortgage insurance. This is an insurance a lender obtains to protect its credit risk on a particular mortgaged asset. It is most often obtained when a lender is providing funds to a borrower at a loan to value ratio in access of 80% of the value of the property. The borrower is charged a lenders mortgage insurance fee which is a one off charge or alternatively a low equity fee. This form of insurance is there to protect only the lender not the borrower. Overseas, particularly in the USA and Australia, virtually all lenders obtain it. More and more lenders are obtaining it here in New Zealand. The good news is that there is competition entering this area and we have seen our charges for this of insurance fall. We are pleased to be able to pass these savings direcctly to our borrowers.

Lending to Trusts

An increasing number of borrowers are using trusts to structure their particular financial circumstances. While many trusts hold only one asset such as the family home others can be more complicated with a number of investment assets. We are more than happy to lend to trusts but as another entity is involved, ie the trust, a little bit more information is required. All lenders will require the following * a copy of the trust deed * copies of any amendments to the trust, such as changes in trustees. * If the trust owns a number of assets or is income producing, then financial accounts maybe required. At the settlement or refinancing dates, it must be noted that all trustees have to sign the mortgage documents. If for instances the trustees are located in different towns or cities, then the logistics of getting all trustees to sign has to be considered. We lend to a lot of trusts and are quite familiar with them.

Invest With Us

In December last year, General Finance Limited released its prospectus to receive funds from the investing public. We are receiving an inflow of funds which we appreciate but we can always do with more. To date all funds have been advanced on either first or second residential mortgages. This method of retail funding is complimenting our wholesale funding sources and enables us to offer a full product suite of residential mortgages. We can offer our investors an attractive rate of 9.0% for two years. Other rates and terms are available from our website. Please do not hesitate to contact us for an investment statement and a prospectus. We look forward to receiving your applications.

Our current mortgage interest rates are as follows

Variable rate 8.40%

No Financials Home Loan 9.00

Jumbo Loan 8.40

Quick Start Home Loan 7.25

One-year fixed rate 7.59 Two-year fixed rate 7.59 Three-year fixed rate 7.89 Five-year fixed rate 7.86

Line of credit facility 8.50

Regards William Cairns James Lockie

Cairns Lockie Limited 321 Great South Road, Greenlane, Auckland PO Box 74-212, Market Road, Auckland Website

The interest rates quoted are subject to change and are not necessarily the finance rate for the purposes of the Credit Contracts Act 1981.

Cairns Lockie Limited is not a Registered Bank.

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