Cairns Lockie Mortgage Commentary
Cairns Lockie Mortgage Commentary
Issue 2005 / 8 20 May 2005
Welcome to the eighth 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 20 May 2005) the money markets were at the following levels:
Official cash rate 6.75%
90 day bill rate 7.04 (down from 7.08)
1 year swap rate 7.00 (down from 7.04)
3 year swap rate 6.71 (down from 6.76)
10 year bond rate 5.80 (down from 5.84)
Kiwi dollar 0.7113 (up from 0.7345)
There is nothing in the budget for the home owner or property investor. There is a first home owner subsidiary for which most will not qualify and landlords will be worse off.
About one in every eight first home buyers may receive a subsidiary of up $5,000 to buy their homes under a Kiwi Saver scheme. Given the Australian experience with a similar initiative, the NZ scheme will be inflationary - house prices will rise negating any benefits. Property investors have been hit in two ways; their depreciation allowed on housing improvements will drop by 25% from the current 4% to 3%. And they will find competition for tenants harder as the government is planning to spend a further $132 million on state housing.
Houses are Continuing to Sell
Many commentators are saying that the residential market will slow down. This is occurring but we believe so far it has been relatively minor. In April (New Zealand wide) 8,876 dwellings sold. This was down on the 10,398 sold in March but in previous Aprils the figures were 9,594 (2004), 9,047 (2003), 9,224 (2002). However, we still view last month's figures as acceptable, as they are close to previous years'. March traditionally tends to be a strong month and April more subdued. This may be a reflection on the weather or it being the end of the tax year. Another statistic that is important in determining the health of the market, is the number of days that it takes to sell a property. This has remained a consistent 28 days for all of this year.
Super Jumbo Loans
As house prices continue to increase, so do the size of mortgages that borrowers require. We have recently increased our single property mortgage exposure to $2.0 million. In certain instances we can even go beyond this. This is truly a Jumbo loan. There are several reasons why a borrower may require a mortgage for over $1.0 million.
- They may be purchasing an expensive property. Properties costing over a million dollars are no longer a rarity these days.
- The borrower may already own an expensive property and using it for security for business loans. Overdraft facilities, hire purchase, and plant and equipment borrowing is far more costly than borrowing using a residential security. If you can replace the above types of borrowings with one mortgage over your house and save 5% per year (on a million dollars that is $50,000 per year).
- Borrowers are using their own properties to assist with the purchase of commercial properties for either owner occupation or investment. If you to wish to purchase a commercial property for $1.0million, you can fully fund it by raising $500,000 from a commercial lender and the remaining amount on your own home.
General Finance Taking Deposits
A reminder that our subsidiary company, General Finance Limited is taking deposits. Our flagship rate is 10% for 2 years with the minimum deposit being $5,000. Other terms, ranging from 6 months to 5 years are available at different interest rates. For a prospectus and an investment statement please do not hesitate to call our office on 526 7801 or you can download them at http://www.general.co.nz/prospectus.htm On the other side, General Finance is still looking to do first and second residential mortgages advances.
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 7.74
Five-year fixed rate 7.74
Line of credit facility 8.75
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
If you know anyone who may find this newsletter useful we would be happy for you to forward it on.
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.