Cairns Lockie Mortgage Commentary
Cairns Lockie Mortgage Commentary
Issue 2006 / 19 20 October 2006
Welcome to the nineteenth fortnightly Cairns Lockie Mortgage Commentary for 2006. We aim 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 (8.00 am on 20 October 2006) the money markets were at the following levels:
Official cash rate 7.25% (unchanged) 90 day bill rate 7.78 (up from 7.67) 1 year swap rate 7.76 (up from 7.62) 3 year swap rate 7.36 (up from 7.22) 10 year bond rate 5.86 (up from 5.77) Kiwi dollar 0.6684 (up from 0.6640)
New Product - 85% No Financials
Over the past five years we have been at the forefront of developing the "No Financials" or "Low Document" loans, aimed at those who are self-employed. Until now the most that the self-employed can borrow has been 80% of the value of their residential home, rental properties and batch by self declaring their income. As from today we are increasing our limits to 85% for "No Financials" loans. All our standard terms and conditions applying to our 80% loan limits, will apply to our new 85% exposures. This is a real step forward for those who are self-employed and who, in the past, have found it more difficult to borrow mortgage funds than those who have, say a regular salary or wage paying position.
Increase in Mortgage Rates
Next week the Reserve Bank will review the Official Cash Rate (OCR). There have been no increases this year, but we believe, this time, it is pretty evenly balanced on the Reserve Bank increasing the OCR from it current 7.25% to 7.50%. The reasons for an increase revolve around high levels of business capacity utilisation, increased immigration, and the current mortgage war that may put upward pressure on the housing market. On the negative side or against an increase, inflation may have peaked. Our comment is that any increase would be unwise, as we already have the highest interest rates in the western world, yet we do not have the best performing or richest economy. Our currency may go higher causing more concerns for a high current account deficit and our exporting industries.
Housing Market in Spring
We are now in the middle of October but there has hardly been a spring surge in house prices. Prices have remained remarkably stable. The median price in June was $310,000, increasing to $313,000 in July and dropping back to $310,000 in August. We saw a rise to $313,000 in September. Sales volumes are down on last year according to the Real Estate Institute of New Zealand. There were 8,562 hoses sold in August with 8,671 sold in September 2006. This was well down on the 9,186 properties sold throughout the country in September 2005. Agents have reported some increase in activity but not as much as in previous years.
Funds to Lend on Second Mortgages
Through our subsidiary company, General Finance Limited, we have second mortgage funds available to lend. Second mortgages can be useful if you require a short term accommodation and you wish to leave your existing first mortgage in place. Second mortgages can be used for a variety of purposes including home improvements. They can be a great way to fund that new kitchen, bathroom or garage. On the other side we are looking for deposits - all rates and terms of our investments can be found on our website at www.general.co.nz. Our flagship rate debenture rate is 9.99% for two years with interest paid quarterly.
Our current mortgage interest rates are as follows:
Variable rate 9.20%
No Financials Home Loan 9.80
Jumbo Loan 9.20
Quick Start Home Loan 8.20
One-year fixed rate 8.63 Two-year fixed rate 8.28 Three-year fixed rate 8.07 Five-year fixed rate 7.93
Line of credit facility 9.30