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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2005/6 22 April 2005

Welcome to the sixth 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 22 April 2005) the money markets were at the following levels:

Official cash rate 6.75%
90 day bill rate 7.04 (down from 7.05%)
1 year swap rate 6.99 (down from 7.10%)
3 year swap rate 6.77 (down from 6.94%)
10 year bond rate 5.93 (down from 6.08%)
Kiwi dollar 0.7276 (up from 0.7132)

Our current mortgage interest rates are as follows
Variable rate 8.65%
No Financials Home Loan 9.25
Jumbo Loan 8.65
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 8.75

House prices still strong

Over the past six months or so, most housing market commentators have been saying that prices will soften. That hasn't been the case. The March figures showed a fresh surge in house prices throughout most of the country. In Auckland, the median house price is now $372,000 ($355,000 - previous months in brackets), Auckland CBD's is $435,000 ($385,000) and the North Shore's is $443,000 ($420,000). As a mortgage company, we are noticing:

* Houses in good suburbs are selling quickly. This is confirmed by the latest Real Estate Institute's figures which show the average length of time it takes to sell a house is now 28 days, down from 31 days

* Some agents are again reporting there a shortage of good stock to sell

* On the property investment side, landlords have been saying to us that it is getting harder to find suitable tenants.

Mortgage rates

The next time the official cash rate (OCR) is reviewed is Thursday, 28th April. Consensus opinion in the market is that the Governor will hold the existing rate, 6.75%, but it is finely balanced. One side says rates should increase because we still have strong employment growth, inflation is edging up and house prices remain firm. On the other side, the economy is starting to slow, a number of commodity prices may have peaked and retail spending is slowing. We now have had seven separate wholesale interest rate increases since the beginning of 2004. Borrowers are starting to come off lower fixed rates and on to more expensive ones. The view is that this more expensive money is beginning to be felt within the general economy.

Expensive state houses rented for $75

The issue of state housing is emotive. When there are such obvious abuses it does beg the question, why? The latest Housing Corporation figures show that the 10 most valuable state houses in Auckland are worth more than $800,000 each and some of the tenants have been living in them for years. One state house in Auckland worth about a million dollars is currently rented for just $75 a week. In Wellington, things are not that much better. One tenant has been living in a $495,000 house for nearly 30 years and is paying $96 a week in rent. The obvious solution is to sell these expensive state houses and use the proceeds to build two or three additional houses. This way you can increase the number of houses available and ease the shortage of this type of accommodation.

Confirming your identity

When we process your mortgage or receive your investment deposits for our finance company we ask for identification. We do not do this because we think we should but because we have to, by law, under our financial reporting obligations. For individuals, we require a photocopy of your driver's licence or passport, for a trust, we will also require a copy of the trust deed and, for companies, a copy of its certificate of incorporation. It is time consuming, but it is something we just have to do. In fact, all mortgage lending and deposit taking institutions are required to do this. The good thing is that you only need to do this once and then we have it on file.

Please note our office will be closed on Monday 25 April, being ANZAC day.

Regards William Cairns James Lockie Cairns Lockie Limited 321 Great South Road, Greenlane, Auckland PO Box 74-212, Market Road, Auckland Telephone (09) 526 2000 Facsimile (09) 579 7795


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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