Cairns Lockie Mortgage Commentary 25 Feb 05
Cairns Lockie Mortgage Commentary
Issue 2005/2 25 February 2005
Welcome to the second 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 http://www.emortgage.co.nz/newsletters.htm
The Money Market
This morning (8am on 25 February 2005) the money markets were at the following levels:
Official cash rate 6.50% (unchanged) 90 day bill rate 6.85 (up from 6.83) 1 year swap rate 6.88 (unchanged 6.88) 3 year swap rate 6.80 (up from 6.74) 10 year bond rate 6.06 (up from 5.98) Kiwi dollar 0.7214 (up from 0.7100)
What is Happening with Our Currency
This week our currency hit a post float (March 1985) high of 0.7279 against the US dollar. This has been driven principally by our high official cash rate of 6.5% (compared with 2.5% in the USA, 4.75% in the UK and 5.25% in Australia). In addition our economy is performing strongly and we are seeing a large number of tourists visiting this country and converting their currency into kiwi dollars. Generally a higher currency keeps inflation in check and hence keeps mortgage rates lower.
If our currency was weaker and our inflation rate higher by say two percent our mortgage rates would be now well over 10%. The more difficult question is, where will our currency be in 12 months’ time. The consenus among the participants in the foreign exchange markets is that it will fall to around 0.6700 but this is hard to predict.
Using Housing Equity to Purchase Commercial Property
We are now seeing a number of mortgage applications where investors are wishing to purchase a commercial property and using their home as security. Typical transactions involve say a self-employed person wishing to purchase a floor or a separate commercial property in which to locate their business, or a group of individuals getting together to purchase a property for investment purposes. With the values of residential properties over the last few years, many borrowers with low mortgages are finding they can use their home to fund all or most of their new purchase.
Lenders such as ourselves are happy to lend on residential property where the purpose is to assist with the funding of a commercial property. There are a number of other benefits with this strategy such as lower interest rates and much more flexible mortgage offerings.
Housing Buyers Remain Confident
For the first time in eighteen months more people think it is a good time to buy a house than not according to a recent ASB Bank housing confidence survey. People are saying that they are now getting used to higher prices which may not fall back as much as some commentators are predicting. In the same survey more people thought house prices will be higher at the end of the year than they are now. This is interesting as a number of the more informed commentators have been saying the housing cycle is near its peak. At Cairns Lockie in the past fortnight we have noticed more mortgage applications and the housing markets appears to have become more active.
Investing with us
Currently our company, General Finance Limited is accepting funds from the public. Our flagship rate is 9.0% for 2 years. We do offer other rates and terms ranging from 6 months to 5 years. The funds raised are on-lent on first and second mortgages. We do not lend on such things as chattels, cars, computers and commercial property developments.
This is an opportunity for local investors to become part of the burgeoning mortgage sector which is fast becoming the domain of our foreign owned banks and offshore investors. Please do not hesitate to contact us for an investment statement and a prospectus. We are looking 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 7.20
One-year fixed rate 7.63 Two-year fixed rate 7.59 Three-year fixed rate 7.89 Five-year fixed rate 7.86
Line of credit facility 8.50