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Cairns Lockie Mortgage Commentary - 24 February 06

Cairns Lockie Mortgage Commentary

Issue 2006 / 2 24 February 2006

Welcome to the second Cairns Lockie Mortgage Commentary for 2006. 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 24 February 2006) the money markets were at the following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.50 (down from 7.62)
1 year swap rate 7.33 (down from 7.37)
3 year swap rate 6.80 (unchanged)
10 year bond rate 5.65 (down from 5.69)
Kiwi dollar 0.6587 (down from 0.6763)

Why House Prices Keep Going Up?

Are property investors and speculators really to blame? We think there are many other factors pushing up house prices. There has been an increase in building input costs such as timber, concrete, steel reinforcing, and various bathroom and kitchen items. Tradesman have increased their hourly rate, pushing up labour costs. Government also has an impact, altering for example the overtime regulations and pushing up the cost of labour. Council costs have been increasing for such things as resource consents together with higher compliance costs such as building tests in the wake of the leaking building syndrome. All the above increase the cost of building a home, and as new dwelling costs increase, the price of the existing housing stock quickly follows suit.

Lending on Sale and Purchase Agreements

Is an independent valuer's report required with all mortgage applications? The answer is NO. Over the past few months various councils have released their own valuations which are acceptable to us in a number of circumstances. If you are purchasing a property through a real estate company we can, in many cases, forgo the requirement for a valuation. If a valuation is not required it will save you both money and time. If you are purchasing a property, then just ask one of our lenders whether or not a valuation is required.

Our New Coins

On 31 July this year the Reserve Bank will issue three new coins - in 50, 20 and 10 cent denominations. These coins will be smaller and lighter than the existing ones and the new 10 cent coin will be copper coloured. The 5 cent coin will be consigned to the history books. It will go. All the older coins will be phased out over a three month period and will cease to be legal tender. The $1 and $2 coins will remain unchanged. We are surprised that the Reserve Bank is not introducing a $5 or even a $10 coin. The 50 cent coin, new in 1967 when decimal currency was introduced, in today's monetary value would be worth around $9. There is room for at least a new $5 coin which will be preferable to receiving the often very worn and faded $5 note.

Wellington Property market

The Wellington property market continues to perform well. Part of the reason for this is the continued expansion of the government sector and the ready availability of low equity mortgages for those with secure employment (such as government sector employees). There have been some interesting sales in the region. A well presented up market beachfront home with good views in Moana Road in Plimmerton, north of Wellington, recently sold for $1.65 million. A large five bedroom house located in Queen Street, Petone recently sold for $720,000, a record for this area. On a lighter note a boat shed without any living accommodation, built in the 1950's located at Karaka Bay on Wellington's Miramar peninsula recently sold for $133,000.

Our current mortgage interest rates are as follows:

Variable rate 9.20%

No Financials Home Loan 9.80

Jumbo Loan 9.20

Quick Start Home Loan 8.15

One-year fixed rate 8.58
Two-year fixed rate 8.14
Three-year fixed rate 7.99
Five-year fixed rate 7.99

Line of credit facility 9.30


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