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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Welcome to the fourteenth fortnightly Cairns Lockie Mortgage Commentary
for 2006. We aim 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 (8.00 am on 11 August 2006) the money markets were at the
following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.47 (down from 7.48)
1 year swap rate 7.53 (up from 7.49)
3 year swap rate 7.16 (up from 7.13)
10 year bond rate 5.86 (down from 5.90)
Kiwi dollar 0.6335 (up from 0.6192)

Drop in Home Ownership Numbers

Back in 1993 we were among the top four countries in the world regarding
home ownership rates. Currently we have slipped to around fourteenth,
with countries such as Canada, USA, U.K, Australia, Spain and Singapore
all ahead of us. One of the explanations is New Zealand's high marginal
tax rates, which come into effect on relatively modest incomes. On
incomes of $38,000 the marginal tax rate is 33%, jumping to 39% at
$60,000. This catches a number of, particularly younger people, such as
those who have recently graduated from university, completed a trade or
work overtime or have a secondary job. They are now paying one third of
their income in tax. This high rate of income tax, plus GST, and student
loans, makes it impossible to save and buy a home. Our view is that some
lowering of taxes, particularly in the lower and middle income bands,
may enable more people to actually save and become home owners.

50 Year Mortgages

Forty and 50 year mortgages will shortly be offered by lending
institutions. But virtually no mortgage will run the full 50 year term.
The duration of mortgages is getting shorter and most mortgages now last
for 2 to 4 years before they are repaid or refinanced, in most cases to
another institution. A 50 year mortgage is purely a cash flow exercise.
You will pay less each month than on a conventional 20 year mortgage.
Interest only mortgages are common at the moment with a number of
lenders offering these for up to 10 years. (We do). If a borrower is
prepared to change lender every 10 years, they can in fact have a
mortgage that never gets repaid. A 50 year mortgage will become one of
the many mortgage offerings available to the borrowing public. More
choice is better than less.

More on Our Currency

Our new coinage has now been in circulation for nearly a fortnight.
There has been discussion on replacing our $5 note with a coin. It is
interesting that we have not increased the denomination size of our
notes, from the current $100 to say $500 or even $1,000. In 1967 we had
a $100 note which in today's terms is worth around $1,433 using the
Reserve Bank's calculator. This note actually replaced a 50 pound note
that the Reserve Bank first issued in1934, which would now be worth
around $5,000 in today's money. Larger denomination notes and coins have
always been a feature of our currency.

Solid House Prices in Roseneath

Wellington has had a number of high house price sales over the past 12
months. Most have been in Oriental Bay but other areas are seeing some
healthy prices as well. One recent sale was a large well appointed villa
in Carlton Gore Road in Roseneath, an upmarket suburb next to Oriental
Bay. It was the property's first time on the market in 43 years, and it
sold for $2.125 million. This was way above the council valuation of
$1.075 million.

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 8.00

One-year fixed rate 8.58
Two-year fixed rate 8.23
Three-year fixed rate 8.23
Five-year fixed rate 7.94

Line of credit facility 9.30

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

Residential Mortgage Lenders: (ddi 09 526 7801) (ddi 09 526 7802) (ddi 09 526 7805) (ddi 09 526 7812) (ddi 09 526 7818) (ddi 09 526 7811)

Lending Support: (ddi 09 526 7803) (ddi 09 526 7816) (ddi 09 526 7806) (ddi 09 526 7804) (ddi 09 526 7817)

Loan Administration: (ddi 09 526 7819) (ddi 09 526 7808) (ddi 09 526 7813) (ddi 09 526 7814) (ddi 09 526 7815) (ddi 09 526 7800)

Loan Arrears: (ddi 09 526 7809) (ddi 09 526 7809)


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