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Cairns Lockie Mortgage Commentary - 11 March 2005

Cairns Lockie Mortgage Commentary

Issue 2005/3 11 March 2005

Welcome to the third 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 11 March 2005) the money markets were at the following levels:

Official cash rate 6.75% (up from 6.50%)
90 day bill rate 7.03 (up from 6.85%)
1 year swap rate 7.08 (up from 6.88%
3 year swap rate 6.96 (up from 6.80%)
10 year bond rate 6.22 (up from 6.05%)
Kiwi dollar 0.7425 (up from 0.7214)

Exchange Rate / Mortgage Rates

Yesterday the Reserve Bank Governor increased the Official Cash Rate (OCR) by 0.25% or 25 basis points from 6.5% to 6.75%. Many commentators did not think the Governor would tighten monetary policy but he was clearly driven by inflation remaining at the higher end of the 1-3% band, low unemployment and strong retail spending. The interesting aspect of this rise in wholesale interest rates, is that both the short term and longer term rates have risen. This means that both floating and fixed rate mortgage rates will rise. On the negative side our exchange rate will also rise. Since this announcement we have already seen the Kiwi rise to over 0.74 cents against the $US. This continues to erode our exporters returns - a vital part of the economy on which we all depend.

LIM Reports

A LIM (Land Information Memorandum) is a report provided by a local authority (City Council) from its records. A LIM report is useful for intending purchasers of a property as it will identify the following,

" whether building consents have been properly obtained.
" the zoning.
" details on storm water and sewerage drains.
" aspects such as proposed road widening, tree protection and any historical places covenants.
" special features regarding the land such as erosion, avulsion (removal of land by water action), flooding etc.

A LIM can be obtained from your local Council. They cost around $200 plus GST but note it can take up to 10 working days to receive it. Alternatively your solicitor will be able to obtain a copy for you. We believe these reports are useful if you are purchasing a property.

Building Consents Slowing

In January new housing consents fell by 7.2% from the previous month to 1,800. This more than reversed the 5.4% gain in December. There is normally a slowdown over the holiday period and the figures are seasonally adjusted to show this. Most of the decline in the consents was in the apartment market - these were down by 26% and the majority of the decline was in Auckland. This is to be expected, as around four thousand new apartments are coming on stream within the next 12 months in Auckland. Immigration is slowing, so it will become harder to maintain the current levels of rental. On the upside, the increased number of new apartments does offer consumers the choice of whether they live in the suburbs or experience true city living. In Auckland and Wellington, to a lesser extent, it is a sure way to beat the traffic congestion and the longer commuter times.

Larger Loans

We are now lending on more expensive properties. Our loan amounts on any individual property have increased from $750,000 to up to $2,000,000. This change has been driven by the escalation in property prices in the past few years and bigger more expensive properties being built. We have increased our single exposure to borrowers to similar levels. We are keen to assist those people wanting to purchase luxury homes or those building up larger portfolios of rental properties. We can lend these amounts on properties for other purposes apart from funding their purchasing. We can provide funds to consolidate other more expensive debt, or you can use your home to assist you to fund other residential or commercial properties or even holiday homes.

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 7.40
One-year fixed rate 7.83
Two-year fixed rate 7.79
Three-year fixed rate 7.99
Five-year fixed rate 7.99
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

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