Cairns Lockie Mortgage Commentary 8 March 2002

Issue 2002/3 8 March 2002

Welcome to the third Cairns Lockie Mortgage Commentary for 2002. 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 8 March 2002) the money markets were at the following levels:

Official cash rate 4.75% (unchanged)
90 day bill rate 5.13 (up from 5.00)
1 year swap rate 5.75 (up from 5.50)
3 year swap rate 6.71 (up from 6.48)
10 year bond rate 6.81 (up from 6.56)
Kiwi dollar 0.4295 (up from 0.4180)

Who is Purchasing Apartments?

The apartment market has regained popularity, particularly in Auckland, after a quiet couple of years. Who is buying theses types of properties? According to Bayleys Research, about half the purchasers are overseas buyers, including New Zealanders living overseas. Also around half the purchasers are investors. The great majority of the buyers are either single people or couples (rather than families). The buyers are split evenly between those in their 30s, 40s and their 50's. Very few are in their 60's plus or the twenty-somethings. The twenty-somethings favour terrace houses over apartments. A recent trend is that buyers prefer larger apartments rather than the smaller ones that were popular two or three years ago.

Is Price the Only Criteria?

Most of the competition in the mortgage market, currently, seems to be based on price. But when looking for a mortgage, a number of other factors should be considered

1) Is there a full redraw facility? Can you make lump sum payments and then get your money back at a future date? 2) Are there absolutely no ongoing fees: such as monthly, quarterly, redraw or account management fees? 3) Can you fix your mortgage or part of it at any time? 4) Do you have a specific lender with whom you can talk? A telephone prompting service is not good enough. 5) Does the institution have an up to date internet and telephone banking system.

At Cairns Lockie we can answer yes to all the above, as well as offering a particularly competitive variable interest rate.

Interest Rates - Up or Down?

There is some talk in the market that interest rates rises are imminent. We believe this talk is a little premature. Fixed rates have risen over 1.5% over the past three months, in the expectation of improving world economies in 2003/4. Over the short term, we believe that floating rates will remain static for the following reasons - Although growth in the NZ economy has been good, it is expected to ease. Growth for the year to end March 2002 is expected to be 2.8%, rather than the forecasted 3.0% - The housing market is strong but this is localised around Auckland. Median house prices for NZ have remained unchanged for the last year. - There are still some uncertainty about when the global economies will improve. Will they improve later this year or next? Some countries like Japan look as they may get worse before things improve. The Official Cash Rate will be reviewed next month (17 April). We do not anticipate any changes. The next reviews are in July and October. If our economy and those of our trading partners deteriorate, then our rates will ease. If the economies improve then there will be a tendency for rates to rise.

We are Looking for Funds. Our Special Investor Rate is 8.0%

At Cairns Lockie we currently operate a contributory mortgage company. On a regular basis we offer our investors an opportunity to invest in mortgage securities. We are only offering quality first mortgages secured over residential properties. Why do borrowers wish to borrow from a contributory mortgage company at rates higher than say bank borrowing? There are several reasons including: the wish to capitalise interest, interest only requirements or the need for a flexible short-term facility.

Currently we have first mortgages available, secured over Auckland residential property. The term is for 2 years at a rate of 8%. For further information please contact William Cairns.

Our current mortgage interest rates are as follows

Variable rate 6.40%

No Financials Home Loan 7.40

Quick Start Home Loan 6.42

One-year fixed rate 6.71
Two-year fixed rate 7.35
Three-year fixed rate 7.72 (new)
Five-year fixed rate 8.10

Line of credit facility 6.75

Regards William Cairns James Lockie

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