Cairns Lockie Mortgage Commentary

Issue 2001/4 16 March 2001

Welcome to the fourth Cairns Lockie Mortgage Commentary for 2001. 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 morning (9am on 16 March 2001) the money markets were at the following levels:

Official cash rate 6.25% (down from 6.50%)
90 day bill rate 6.22 (down from 6.45)
1 year swap rate 5.80 (down from 6.17)
3 year swap rate 6.00 (down from 6.26)
10 year bond rate 5.88 (down from 5.90)
Kiwi dollar 0.4113 (up from 0.4340)

OCR Cut is Good News

The big news this week was the Reserve Bank reducing the Official Cash Rate from 6.50% to 6.25%. This had an immediate effect on floating rate mortgages, which eased by one quarter of a percent. Despite this reduction, the OCR is higher in New Zealand than all of our main trading partners, who have seen one or more easings over the past two months. New Zealand is running a much tighter monetary policy as evidenced by the following comparative Cash Rates:

NZ 6.25%
Australia 5.75%
USA 5.50%
UK 5.75%

The reasons for this discrepancy are varied: some parts of the economy are performing well, tourist numbers continue to increase and unemployment is at historically low levels in a number of regions. On the negative side, the world economy is apparently slowing which will affect our exporters in the medium term. Our comparatively higher interest rates, further disadvantages our productive sector.

Cairns Lockie Cuts Its Floating Rate

As a result of the decrease in the OCR on Wednesday, Cairns Lockie has reduced its floating rate from 8.25% to 8.00%. For our existing borrowers this will take effect next month. All clients on our floating rate will receive a letter notifying the change in rate. Most borrowers want their repayments to remain the same, and so we effectively reduce the term of their mortgages. For those who want their payments lowered, please give us a call or send us an email and we will arrange this for you. Our line of credit rate has reduced to 8.35%

Housing Confidence on the Rise

New Zealand has experienced a modest increase in housing confidence since late last year, according to the latest ASB Bank quarterly survey of housing intentions. The survey also showed that 49% of potential homebuyers thought it was a good time to buy. Improvements are being seen in all three main centres. The ASB Bank's survey follows the one last month by the Residential Property Investors Magazine which found that 82% of property investors thought it was a good time to buy. Real estate agents, with whom we talk, are also confirming the above, with comments that life is coming back into the residential property sector.

Strange, is there a Shortage of Rental Accommodation?

Last year the Government introduced a number of changes for those eligible for a state house. One such change was that low-income tenants would not pay more than 25% of their income in rent. One result of this is that the nation-wide waiting list for state houses has increased by a further 1,500 since December to 11,500 at the end of January. To alleviate this problem the Government is going to start building more state houses. We think this is a crazy policy. We are aware of a number of private landlords who are finding it difficult to obtain tenants. This is evidenced particularly in Auckland, where in some cases, we have seen rents ease by as much as 20% over the past two or three years. It would make much more sense for the Government to encourage state tenants to seek accommodation which is available in the private sector and say guarantee the rental to the private landlord. This way they can utilise some of the surplus accommodation within the private sector without exacerbating the surplus and creating more government inspired housing ghettos.

Our current mortgage interest rates are as follows

Variable rate 8.20% (new)

Quick Start Home Loan 6.99
One-year fixed rate 7.35
Two-year fixed rate 7.35
Three-year fixed rate 7.45
Five-year fixed rate 7.55

Line of credit facility 8.35 (new)

Regards William Cairns James Lockie

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