Cairns Lockie Mortgage Commentary - 9 May 2008
Cairns Lockie Mortgage Commentary
Issue 2008 / 7 9 May 2008
Welcome to the seventh fortnightly Cairns Lockie Mortgage Commentary for 2008. We aim to keep you informed on developments at Cairns Lockie, Home Loans 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 am on 9 May 2008) the money markets were at the following levels:
Official cash rate 8.25%
90 day bill rate 8.59 (down from 8.92)
1 year swap rate 8.15 (down from 8.66)
3 year swap rate 7.55 (down from 7.93)
10 year bond rate 6.30 (down from 6.47)
Kiwi dollar 0.7721 (down from 0.7965)
Further Interest Rate Cuts in the USA
Last week the US Federal Reserve cut its overnight cash rate from 2.25% to 2.00%. This means that mortgage rates will decrease. The reasons for these several rate decreases over the past 9 months are varied: it is assisting in keeping the banking system liquid, providing some relief to home owners who are facing, in a number of areas, real falls in asset prices and to trying and keep the USA economy out of a recession. It is a complete contrast to this country, which is maintaining a very tight monetary policy with high interest rates. Yet there is clear evidence that parts of our economy are slowing. Our Reserve Bank maintains that interest rates have to be high due to inflationary pressures. In the USA this does not hold up - in that country the official cash rate is below the inflation rate. It is clear that our Reserve Bank Governor has room to move our rates down.
Residential building consents (approvals to build new dwellings) have dropped by a third to 1,567 from 2,269 compared with the same time last year. Apartment consents dropped more sharply from 190 this time last year, to 50 to March this year. This downward trend in consent approvals commenced in June last year. Non residential building consents (commercial properties) are not as badly affected - consents are only down 14% year on year. The Master Builders Association has recommended to the Government that, due to the relatively steep downturn in residential construction, the Reserve Bank should look at easing our interest rates.
Mortgage Rates in the UK
What is happening in the UK is of interest to many in New Zealand. Over the past 12 months the British Central Bank, the Bank of England has cut the overnight rate from 5.75% to 5.25%. Most mortgage rates range from around 6.10% to about 6.50%. For example, one of the largest lenders, Halifax, offers mortgages on owner occupied property ranging from 6.10% to 6.49%. Home owners are enjoying mortgage rates of around 3.5% - 4.5% lower than in this country.
Finance Company Investments
Our finance company, General Finance Limited is currently taking deposits. Our headline is rate for a 2 year investment is 11.25%. All our funds are advanced on first and second mortgages secured over residential real estate located only in this country. Interest is paid quarterly and all monies are secured under our debenture trust. Our rates are quoted each Saturday in the Herald or in many other newspapers around the country. We welcome your enquiries.
Our current mortgage interest rates are as follows:
Variable rate 10.65%
Lo Doc Home Loan 11.55
Jumbo Loan 10.65
One-year fixed rate 10.08
Two-year fixed rate 9.94
Three-year fixed rate 9.74
Five-year fixed rate 10.24
Line of credit facility 10.75