Cairns Lockie Mortgage Commentary 15 August 2008
Cairns Lockie Mortgage Commentary
Issue 2008 / 14 15 August 2008
Welcome to the fifteenth 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 15 August 2008) the money markets were at the following levels:
Official cash rate
90 day bill rate 8.27 (down from 8.33)
1 year swap rate 7.64 (down from 7.68)
3 year swap rate 7.10 (down from 7.16)
10 year bond rate 6.19 (up from 6.13)
Kiwi dollar 0.6986 (down from 0.7323)
As lending criteria has tighten with the Banks, and with fewer non banks in the market place, an increasing number of borrowers, particularly those with a few credit blemishes are finding it increasingly difficult to obtain mortgage finance. This is where we can assist. We have in the past six years offered non-conforming or specialist mortgages, along with our prime rate mortgages. Recently we have released a new range of specialist mortgage products aiming at those who are unable to obtain a prime rate mortgage due to one or two credit problems that have seriously impacted on the potential borrowers’ credit reports. These issues, normally one-off events, may include a business failure, matrimonial issues, sickness or unemployment. If you have had a mortgage declined for credit issues, give us a call and we will try and assist.
What are Moratoriums?
As an operator of a finance company, General Finance, we follow this sector closely. We have seen a number of finance companies go into receivership and what is increasingly happening is that a number are entering into moratoriums. This is often expressed as being in the best interest for the debenture investors. This is not really true - a moratorium is a de facto receivership. It allows the company to decide when and when it will repay your principal and interest. Investors must be aware this does not guarantee the repayment of your principal and interest in full. In many cases you may not receive all your money for a number of years, if at all. This is not acceptable - a moratorium is just confirming that the company concerned has not been properly managed to meet all its contingencies.
Readers of the NZ Herald will have seen on the front page, every day this week, where a number of real estate agents were involved in a hydraulicing scheme. How did it work? An agent through a friendly party bought a property, then resold it to a third party at a much higher price than what it was worth. The bank accepted the sale and purchase agreement as if was true and say lent 90% on it. The funds were used to pay the first vendor and the agent pocketed the difference, the hydrauliced amount. All went well until the property market weakened. This is all negative for the honest person or couple looking for a mortgage. In many cases a sale and purchase agreement from a reputable real estate company was acceptable in confirming the purchase price of the property. Lenders can no longer be sure that a Sale and Purchase Agreement on land agent’s stationery has been prepared on an arms-length basis. The effect of scams such as these, is that it slows the lending process down as lenders make more checks, and valuations will be requested thereby increasing the borrowers transaction costs.
Property Market on Waiheke Island
Waiheke Island is now considered a suburb of Auckland, a bit like Howick. It is only forty minutes from the CBD by a regular ferry service. It has a permanent population of over 7,000 people although in the summer months during the holiday period the population does considerably exceed this. It has a sought after property market - the median house price in June 2007 was $508,000, a 160% increase on June 2000, according to Bayleys real estate company. The median price to June 2008 was $575,000 based on a low number of sales (twenty-three sales during the last quarter). Despite having a higher median price than the rest of Auckland, Waiheke Island remains popular with home buyers.
Our current mortgage interest rates are as follows:
Variable rate 10.65%
Lo Doc Home Loan 11.55
fixed rate 9.48
Two-year fixed rate 9.34
Three-year fixed rate 9.24
Five-year fixed rate 9.79
Line of credit facility 10.75