Cairns Lockie Mortgage Commentary 16 July 2010
Cairns Lockie Mortgage Commentary
Issue 2010 / 12 16 July 2010
Welcome to the twelfth fortnightly Cairns Lockie Mortgage Commentary for 2010. 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 (9am on 19 July 2010) the money markets were at the following levels:
Official cash rate
90 day bill rate 3.23 (up from 3.20)
1 year swap rate 3.75 (up from 3.69)
3 year swap rate 4.42 (up from 4.37)
10 year bond rate 5.37 (up from 5.36)
Kiwi dollar 0.7080 (up from 0.6900)
Our Friday fortnightly newsletter is coming out today due to staff being on annual leave on Friday.
Many commentators, earlier this year, were saying that interest rates may go up 4 to 5 times in 2010. One bank economist was predicting that interest rates may have starting rising back in March. This did not happen and so far this year we have had only one interest rate increase. Our view is that interest rates may not go up that much more this year. Our economic recovery, which is happening slowly, can best be described as fragile. We have had the European debt crisis which took many by surprise and caused the world share markets to dip by 15%. They have since recovered a little bit in recent weeks. There is some talk that the Chinese economy may slow down as well. Given this and the fact that governments around the world are still wanting to support their economies, interest rates are set to remain relatively low for sometime yet.
Housing sales for June 2010 were soft. Total residential sales dropped to 4,575 nationwide, against 5,206 sales in May and 6,040 in June last year. Why is this? There are likely to be several reasons: net migration is slowing, which has a big effect on the housing market; a slower than expected recovery in the economy; and the tax changes on property (which only affects investors) that occurred in the budget in May. The talk of rising mortgage rates will not be assisting either but on the other hand housing affordability is better now than when the market peaked in 2007. The median price of a dwelling in fact increased in June from $352,000 up from $350,000 in May. The real negative out there is that it is taking longer to sell a property - now up to 45 days from 29 days in 2007. Market commentators are saying that the market will remain subdued for the rest of the year.
Numbers of People per Dwelling
Over the past thirty years, dwellings in New Zealand have been getting bigger and more expensive but the numbers living in them has been reducing. The last census figures in 2006 (there is another one being done next year) showed 49.2% of households had one or two persons only. The fastest growing sector was actually the one person household. The average was 2.6 persons per household. The trend is interesting - in 1951 there were 3.7 people per household, and in 1980 this had fallen to 3.0 and is projected to drop to 2.4 in 2031. The smaller households and the rising price of real estate is one of the reasons that inner city apartments are becoming increasingly popular.
ETS (Emissions Trading Scheme)
The ETS has now been introduced. What this means for most people, so far, is that the price of petrol, electricity, coal and wood has gone up in price. It seems to us that this is just another tax grab by the Government. We were of the understanding that the extra funds raised were going to be used for energy efficient programmes that would be good for the environment. Where are they? We have not seen any programmes offering incentives if you install say solar energy in your home or office. Have public train fares, bus or ferry fares decreased to encourage people to use these services? Has the price of hybrid cars dropped? This is disappointing as the ETS seems, at the moment, to be a revenue collection exercise for the Government without any benefits to the taxpayer, who may be interested in more environmentally friendly projects.
Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the Cairns Lockie Limited Loan Administration Department (below).