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Cairns Lockie Mortgage Commentary Issue 2001/14

Cairns Lockie Mortgage Commentary

Issue 2001/14 3 August 2001

Welcome to the fourteenth 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 evening (5pm on 2 August 2001) the money markets were at the following levels:

Official cash rate 5.75% (unchanged)
90 day bill rate 5.82 (up from 5.78)
1 year swap rate 5.96 (up from 5.93)
3 year swap rate 6.69 (down from 6.74)
10 year bond rate 6.62 (down from 6.67)
Kiwi dollar 0.4185 (up from 0.4135)

Line of Credit - A Business Winner

Many business people have overdraft facilities provided by their trading banks. Their lenders generally require that the business' shareholders provide a mortgage over their residences as collateral. And the overdrafts are at overdraft rates. We are seeing a number of clients taking advantage of our line of credit facility to replace their traditional overdraft. They benefit from a much lower interest rate tied to the housing finance rates. We also find that the lack of annual fees and service commitment charges encourages clients to select our non-bank line of credit facility. If you would like to learn more see http://www.emortgage.co.nz/terms.htm#line or give us a call.

Housing Consents Improve From a Low Base

In June there were 1,640 approvals granted for new houses across New Zealand. Of these consents 244 were for apartments. This was up from 1,598 in June the year before. For the year ending June 2001 there were 19,277 approvals. However this was down by 20.49% on the previous year which had totalled 24,244. Despite the lower approvals for the current year, the last six months have been trending upward, with monthly approvals growing at an average rate of 2%. This conforms with experience in the real estate sector where prices have not really moved this year but turnover and enquiry are improving.

Still More Problems With the Peoples' Bank

The Minister of State Owned Enterprises made an interesting comment earlier this week, admitting that the Peoples' Bank may not go ahead. This was quickly denied by the Minister of Finance. The problem seems to be that confidential information is continuing to be leaked into the public domain. Secondly, there appear to be further problems emerging within NZ Post itself. Their mail business is shrinking at a rate of 2-3% per annum. Management want to implement some drastic changes such as closing a few outlets, and doing away with the Saturday mail delivery, a NZ favourite, that does not exist in many other countries. Market comment is that the soon to be released financial results are expected to show a loss. In summary there are board problems, management issues, their core business is under a real threat, lucrative overseas contracts are being cancelled, and the State owned company may currently be running at a loss. This is not the time to start a speculative banking venture.

Cash Rates to be Reviewed Next on August 15th

The Reserve Bank will review the OCR (Official Cash Rate) in the middle of next month. Consensus suggests there is still a 50:50 chance that the cash rate will be lowered. One of the main aspects the Governor will be looking at is the state of the global economies and whether they are improving or deteriorating.

Another emerging trend is that household levels of debt seem to have stabilised. Household debt is defined as all mortgages, credit cards, personal loans and other consumer debt. New Zealand had low levels in the early 1980's but this has been rising quickly throughout the 1990's to a point where we have similar levels to Australia, Canada and the USA.

Our current mortgage interest rates are as follows

Variable rate 7.40%

No Financials Home Loan 8.40

Quick Start Home Loan 6.69

One-year fixed rate 7.10
Two-year fixed rate 7.65
Three-year fixed rate 7.94
Five-year fixed rate 8.19

Line of credit facility 7.75

Regards William Cairns James Lockie


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