Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2006 / 10 16 June 2006

Welcome to the tenth fortnightly Cairns Lockie Mortgage Commentary for 2006, aiming 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 (8.00 am on 16 June 2006) the money markets were at the following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.48 (up from 7.47)
1 year swap rate 7.42 (down from 7.43)
3 year swap rate 6.98 (down from 7.01)
10 year bond rate 5.82 (up from 5.78)
Kiwi dollar 0.6226 (down from 0.6316)

Diversify Your Lenders

Financial commentators suggest that share market investors should have diversification in their portfolios. We think that the same should apply to property investors. If you are planning to purchase say four rental properties it would be advisable to have them all located in different suburbs. The principal of diversification should also apply to your borrowing sources. We see situations where an individual owns a number of rental properties plus their own home and all their borrowings are with the same lender. What happens if that lender, due to changes within the economy or with a different view on New Zealand, changes its lending policy on rental properties or larger exposures. That lender may become increasingly difficult to deal with. One solution is to diversify or increase your number of lenders. It would be wise to consider a non-bank such as Cairns Lockie, that can offer an alternative to your main lender plus some enhanced product features including full redraw facilities and ten years' interest only.

Unit Titles Act to be Revamped

Recently the Department of Building and Housing released a policy document "Review of the Unit Titles Act 1972", which as the name implies looks at reviewing the current legislation. This is timely as when the original Act was passed apartments, which are subject to this legislation, were far less common than they are now. One area of this review which we believe needs looking at, is the operation of body corporates. It is important that body corporates can collect their levies and quickly enforce penalties against those who do not pay - this is a real issue at the moment. A well run and funded body corporate is critical in keeping an apartment complex in a clean tidy order and well maintained.

General Finance Posts a Good Result

Our subsidiary company, General Finance Limited, has released its March 2006 annual financial result, posting an audited profit before tax of $473,555, up from $230,931 on the year before. Total assets (excluding funds under management) increased to $8.34 million, well up on $2.77 million the previous year. All lending is on a secured first and second mortgage basis over residential property. General Finance's aim is to grow its book carefully by offering borrowers a range of short term bridging type products. It also wants to give depositors comfort that they are funding a well run company with a clearly defined policy of lending just on residential property assets.

Wanting to Build But Cannot Confirm Your Income

We are known for our "No Financials or Low Document" loans which allow self employed people to borrow funds in order to purchase their own homes or rental properties by self declaring their incomes. We have extended this to construction loans. If you are self employed and want to erect your own home or build one or two rental properties, then we can fund up to 80% of the construction cost. For years it has always been more difficult for the self employed to borrow but our "No Financials or Low Documentation" range of loan products closes this gap and makes it much easier for the self employed. We welcome your enquires.

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 7.95

One-year fixed rate 8.38
Two-year fixed rate 7.98
Three-year fixed rate 7.93
Five-year fixed rate 7.84

Line of credit facility 9.30

Regards
William Cairns
James Lockie

ENDS

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