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Cairns Lockie Mortgage Commentary - 10 March 2006

Cairns Lockie Mortgage Commentary

Issue 2006 / 3 10 March 2006

Welcome to the third 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 10 March 2006) the money markets were at the following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.56 (up from 7.50)
1 year swap rate 7.35 (up from 7.33)
3 year swap rate 6.80 (unchanged)
10 year bond rate 5.74 (up from 5.65)
Kiwi dollar 0.6500 (down from 0.6587)

Market Slower but House Prices Remain Steady

The overall housing market is beginning to slow as the recently released January 2006 figures show, but interestingly prices remain steady. House sales in January nationwide were 6,366 dwellings sold, compared with 6,906 in December and 7,071 in January 2005. Estate agents are commenting that the market is quieter, with properties taking longer to sell, and fewer people attending open homes. Prices however seem to have held up. The median house price in January was just a fraction over $300,000 after slipping in December to $295,000, but the same as the all-time high recorded last November. This year will be quieter than last year but one thing which will assist the property market is that mortgage rates have peaked. Good news yesterday for the market is that the Governor of the Reserve Bank did not increase the Official Cash Rate.

The Kiwi Saver

The Kiwi Saver is a workplace savings scheme which is expected to come in next April (2007). It will cover all work places regardless of the number of staff. Employees have a choice to contribute either 4% or 8% of their taxable income. Savings are portable and locked away until retirement. There seems to us to be far more negatives with the scheme than positives. The performance of most superannuation schemes in recent years has been poor. How safe is your investment? Can the government take your money to meet unpaid taxes or the courts similarly when a case goes against you. Can you evade your creditors by locking your money away in this scheme? The only thing we like, is that first home buyers can withdraw their funds to assist them when purchasing a property.

100% Home Loans Going Well

There seems to be mixed messages coming from Government circles on 100% home loans. Kiwibank is currently offering them, yet the Reserve Bank seems to be doing everything in its power to slow the mortgage sector down. We offer 100% Home Loans and are finding a steady demand for them. Initially they were offered to professional people on good incomes but we have considerably widened our parameters to include the ordinary person (affordability is still important). We have, in addition, extended the locations and now lend in many more provincial towns. We are keen to assist here as we believe that owning your own home is a sound strategy.

Another Wellington Record

An Oriental Bay landmark, a well presented superior turn of the century villa locally known as one of the seven sisters, recently sold for in excess of $3 million. The property sits in a prime location offering wide views of both the harbour and the city. The property was originally purchased in 1995 for $930,000. The price may well exceed the previous record sale price of a Seatoun villa once occupied by the former Prime Minister, Norman Kirk which sold for $3.35 million last year.

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 8.53
Two-year fixed rate 8.04
Three-year fixed rate 7.89
Five-year fixed rate 7.89

Line of credit facility 9.30

William Cairns
James Lockie

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