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Cairns Lockie Mortgage Commentary 8 June 2007

Cairns Lockie Mortgage Commentary

Issue 2007 / 9 8 June 2007

Welcome to the ninth fortnightly Cairns Lockie Mortgage Commentary for 2007. 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 8 June 2007) the money markets were at the
following levels:

Official cash rate 8.00% (up from 7.75%)
90 day bill rate 8.36 (up from 8.11)
1 year swap rate 8.48 (up from 8.22)
3 year swap rate 8.31 (up from 7.97)
10 year bond rate 6.67 (up from 6.32)
Kiwi dollar 0.7503 (up from 0.7280)

What are Corporate Trustees?

There is growing trend to use family trusts to structure ones affairs. For most trusts the trustees are the settlors together with independent trustees being either a lawyer or an accountant. An alternative to this is to use a corporate trustee which is a limited liability company. This company may be the like of NZ Guardian Trust or the Public Trust who acts as trustees for a large number of trusts or a single purpose company which has been specially set up just to act as a trustee for your trust. There are both advantages and disadvantages in using a corporate trustee company. It is most important to obtain independent legal advice when forming a trust and secondly to discuss with your legal adviser, who the appropriate trustee or trustees should be.

General Finance Posts a Good Result Our subsidiary company, General Finance Limited, has released its March 2007, annual financial result, posting an audited profit before tax of $702,909, up from $473,555 on the year before. Total assets (excluding funds under management) increased to $10.12 million, up on $8.34 million the previous year. The paid up capital of the company increased to $2.0 million, well up on the $1.0 million of the previous year. All lending continues to be on a secured first and second mortgage basis over residential property. General Finance's aim is to grow its book carefully by offering borrowers a range of short term bridging type products. It also wants to give depositors comfort that they are funding a well run company with a clearly defined policy of lending just on residential property assets. The new prospectus will be ready later this month.

KiwiSaver and Home Ownership

One of the positives of KiwiSaver, is that participants in the scheme will be able to withdraw their contributions, probably after 3 years to assist with the purchase of their first home. This is particularly helpful to couples as they can withdraw two lots of contributions. What is wrong is that the Government wants to tell you what sort of house you can buy. They are talking about housing caps, likely to be $400,000 for Auckland and $300,000 for most of the rest of the country to stop " big earners getting state subsidies to buy mansions". This is crazy - the early withdrawal scheme should be there to promote homeownership, not to impose government social policies.

Apartment Prices Soft

A recent report in the Dominion Post, noted that many investors buying apartments in Auckland off the plans have suffered losses when trying to sell them. Examples cited were a small CBD apartment bought of the plan for $299,000 and later sold at auction for $190,000 and a leasehold apartment bought of the plan for $100,000 and later sold for $44,000. Both of these apartments were small with floor areas under 40 square metres. Auckland inner city apartment prices are reported to have bottomed out a year ago and have been rising since then although may have slowed again with recent interest rate rises. Rental demand however is strong.

Our current mortgage interest rates are as follows:

Variable rate 9.70%

No Financials Home Loan 10.30

Jumbo Loan 9.70

One-year fixed rate 9.34
Two-year fixed rate 9.14
Three-year fixed rate 9.14
Five-year fixed rate 9.07

Line of credit facility 9.80

William Cairns
James Lockie



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