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Cairns Lockie Mortgage Commentary 3 November 2006

Issue 2006 / 20 3 November 2006

Welcome to the twentieth 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 (5pm on 2 November 2006) the money markets were at the following levels:
Official cash rate 7.25% (unchanged)

90 day bill rate 7.58 (down from 7.78)

1 year swap rate 7.65 (down from 7.76)

3 year swap rate 7.31 (down from 7.36)

10 year bond rate 5.72 (down from 5.86)

Kiwi dollar 0.6725 (up from 0.6684)

Reserve Bank Leaves Rates Alone

Last week the Reserve Bank left the Official Cash Rate (OCR) unchanged at 7.25%. This surprised a number of commentators but we believe it was the right decision. The Reserve Bank’s main reason for not increasing the OCR, was a lower near term inflation rate outlook, mainly as a result of lower fuel prices and a slightly higher exchange rate. It also said any easing in interest rates is still a way off. We are noticing that the mortgage markets are quieter this year than in previous years. The OCR is being reviewed in Australia and is likely to rise. As a result our exchange rate (against the Aussi) should ease slightly which will benefit our exporting sector.

New Housing Consents Still Firm

Residential housing consents hit an eighteen month high in September with 2,545 consents being granted. A large number of these were for apartments. It should be noted that these are consents and most of the completed dwellings will not come onto the market for at least 6 - 18 months. The increase in consents is on the back of a slight increase in immigrants coming into this country, and people deciding to build now believing that both building and compliance costs will continue to increase ahead of our inflation rates over the next couple of years.

100% Home Loans - More Options

Amongst the innovations we have brought to the home loan market, has been the 100% Home Loan. Until now most of these types loans have been a first mortgage to 95% of the value of the property, followed by a second mortgage for the remainder. We have now added a single 100% mortgage product. This home loan has the usual product features - it can be split, with fixed or floating interest rate options, and redraw facilities to name a few. It has the added benefit of being entirely at first mortgage rates (8.40% fixed). We will continue to offer both types of our 100% Home Loan, our combination of a first and second or our straight 100%. This now gives us the most comprehensive offering in the rapidly growing 100% Home Loan market. We welcome your enquires.

LAQCs - Loss Attributing Qualifying Companies

Loss Attributing Qualifying Companies are popular with property investors due to tax and structuring reasons. They are an easy way to offset any losses made on property investments against other taxable income. There is some talk in government circles that in the future of these types of companies is being reviewed. We believe any changes are unwarranted. In particular, the tax advantages these companies offer are available to those who hold rental properties in their own names or in partnerships. If the LAQC rules were changed investors will have to transfer their properties back to their own names to continue receiving these advantages. There are a great many other businesses, which are not property related, that use the same structures. LAQCs are ideal structures in many circumstances for small closely held family businesses that are common feature in this country. It would be a great shame to deny this sector the benefits of the LAQC structure just to target or punish property investors.

Our current mortgage interest rates are as follows:

Variable rate 9.20%

No Financials Home Loan 9.80

Jumbo Loan 9.20

One-year fixed rate 8.73

Two-year fixed rate 8.09 (hot new rate)

Three-year fixed rate 8.17

Five-year fixed rate 7.98
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


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