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Cairns Lockie Mortgage Commentary 1 December 2006

Cairns Lockie Mortgage Commentary

Issue 2006 / 22 1 December 2006

Welcome to the second to last 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

The Money Market

This morning (8am on 1 December 2006) the money markets were at the
following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.65 (up from 7.64)
1 year swap rate 7.69 (up from 7.67)
3 year swap rate 7.35 (up from 7.30)
10 year bond rate 5.76 (down from 5.77)
Kiwi dollar 0.6785 (up from 0.6600)

Subletting of State Houses

There is, according to Housing New Zealand a long waiting list for those applying for a state house. It is appalling to learn that there are people with state houses who are subletting them. According to National's Housing spokesman, Phil Heatley, this is the issue that he receives the most anonymous phone calls about. This problem was highlighted further, when a long term state house tenant was subletting her state house in Hillmorton in Christchurch, charging rent on it and then living in her own home elsewhere. She has ceased to be a Housing New Zealand tenant. These scams point to real sloppiness within the management of Housing New Zealand plus it is an additional cost on you and me, the taxpayer.

Improvements to Our 100% Home Loan

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Our 100% Home Loan is going well. We are continuing to develop and enhance this product. Our range of suitable locations is increasing and now includes areas such as Taupo and Queenstown. We are increasing our product options as well - a portion can now be interest only. The low equity fee can be added too. This is good news for the first home buyer who finds it difficult to save the required deposit. We continue to offer other 100% home loan options, such as our 95/5% or 90/10% which is combination of a first and second mortgages. We welcome your enquiries.

Valuations Can Be Useful When Selling

We do get people saying to us that they think they may have sold their house too cheaply. This is often the case when the property concerned sells quickly, in a matter of days. To protect yourself or if you are not sure of the current prices in your area you should to obtain a registered valuer's report suggesting a selling price. The advantage of this is that the valuer is working only for you. A valuation normally costs between $300 and $400, which is a small cost when you are dealing with a house that may be worth hundreds of thousands of dollars. It may even lead to your obtaining a higher price.

Are Houses Getting Less Affordable?

At a recent Affordable Housing Forum in Wellington, the Minister of Housing, Chris Carter said that 20 years ago in 1986 the average house cost about three times the average household income. Today the national house price is 6.6 times the average household income of $50,000, and as a result houses are more expensive (Dominion 18 November). This is not quite correct. What is missing, is that in 1986 mortgage rates were 17 to 18% whereas today, they are half this - they range between 8 and 9%. All other things being equal, if a family can only service 3 times the average house price in 1986 they can now service double this amount, i.e. 6 times. Looking at the Minister's figures, servicing a mortgage now is only marginally more expensive, as a percentage of your income, than it was in 1986. What makes things more difficult is the much higher levels of consumer debt today and the higher marginal tax rates when compared with 1986

Our current mortgage interest rates are as follows:

Variable rate 9.20%

No Financials Home Loan 9.80

Jumbo Loan 9.20

One-year fixed rate 8.78
Two-year fixed rate 8.14
Three-year fixed rate 8.17
Five-year fixed rate 8.08

Line of credit facility 9.30

William Cairns
James Lockie


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