Cairns Lockie Mortgage Commentary 6 Oct
Cairns Lockie Mortgage Commentary
Issue 2000/19 6 Oct 2000
Welcome to the nineteenth issue of the Cairns Lockie Mortgage Commentary for 2000. This is a fortnightly electronic newsletter which aims 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 http://www.emortgage.co.nz/newsletters.htm
The Money Market
This evening (5pm on 5 October) the money markets were at the following levels:
Official cash rate 6.50% (unchanged from last fortnight) 90 day bill rate 6.68 (up from 6.66) 1 year swap rate 7.01 (up from 6.99) 3 year swap rate 7.12 (down from 7.23) 10 year bond rate 6.76 (down from 6.83) Kiwi dollar 0.4048 (down from 0.4090)
Reserve Bank Leaves Official Cash Rate Unchanged
The Reserve Bank left the Official Cash Rate unchanged this week (4 Oct 2000) even though they are expecting a spike in inflationary pressures in the medium term. The Reserve Bank acknowledged that business confidence was moderate, consumer confidence was neutral, credit growth was slow and the outlook for house prices flat. The announcement is good news for those with mortgages. Interest rates will not be increasing as a result the announcement and we should have stability in the mortgage market for the rest of the year.
The US Federal Reserve and the Australian Reserve Bank left their cash rates unchanged in similar reviews this week. The official cash rate in the USA is the same as ours at 6.5% and in Australia it is 6.25%. The next review of our Cash Rate is in early December.
Our Loan Service Net
In our last newsletter we introduced our internet banking service, the Loan Service Net. This has been a great success. The Loan Service Net works best with one of the later versions of either Netscape or Internet Explorer. If you are running an older version you can obtain an update free by going to http://home.netscape.com/computing/download/index.html or http://www.microsoft.com/downloads/search.asp Check out the Loan Service Net Demo at http://www.emortgage.co.nz
Absolutely Positively Wellington
We hear gloomy talk in the residential property sector. However a review of the August figures from the Real Estate Institute shows, that based on the previous year prices, Auckland has remained static, but Wellington has shown an increase, with the median price rising from $170,000 to $188,500. This is good news for people living in the Capital. Price changes in the four main regions were:
August 1999 August 2000 Auckland $230,000 $235,000 Waikato/BOP/Gisborne $155,000 $155,500 Wellington $170,000 $188,500 Canterbury/Westland $145,000 $143,000
NZ Total $169,000 $170,000
We have had a few people contact us about borrowing offshore. The rational is they will get a cheaper rate and when the Kiwi dollar appreciates, they will pay back less principal. There are a couple of risks with this strategy. We do not know if the Kiwi dollar has bottomed and, with the exception of Japan, the majority of overseas interest rates are not that different to ours. Floating mortgage rates in Australia and the USA are around 8.0%. Our floating rate mortgage rate at Cairns Lockie is only 8.25%. We are very cautious about people borrowing overseas. It should only be contemplated if the borrower has overseas assets and cashflows. If you look at NZ's mortgage rates over the past thirty years, today's rates are still low.
Our current interest rates are as follows
Variable rate 8.25%
One-year fixed rate 8.11 Two-year fixed rate 8.20 (down) Three-year fixed rate 8.30 Five-year fixed rate 8.39
Line of credit facility 8.60
Regards William Cairns James Lockie