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Cairns Lockie Mortgage Commentary 3 August 2007

Cairns Lockie Mortgage Commentary

Issue 2007 / 13 3 August 2007

Welcome to the thirteenth fortnightly Cairns Lockie Mortgage Commentary for 2007. We aim to keep you informed on developments at Cairns Lockie, Home Loans and the mortgage market in general. Previous issues of this commentary can be found on our website

The Money Market

This morning (8am on 3 August 2007) the money markets were at the
following levels:

Official cash rate 8.25% (up from 8.00)
90 day bill rate 8.58 (up from 8.50)
1 year swap rate 8.61 (up from 8.59)
3 year swap rate 8.27 (down from 8.34)
10 year bond rate 6.53 (down from 6.86)
Kiwi dollar 0.7633 (down from 0.7932)

Home Affordability

According to a recent report from credit rating agency, Fitch Ratings, New Zealand's households are the most vulnerable in the OCED to housing, income and interest rate shocks. This is fairly obvious as we have the highest interest rates in the developed world. If our mortgage rates were at the levels of Europe, 5% or the UK, 6 -7% then we would be at no more risk than the rest of the world. It was good to see that NZ based economic research group BERL, criticising the Governor of our Reserve Bank saying there is not an inflation problem in this country, there is no justification in hiking interest rates and so putting our households, manufacturing and exporting sectors under further financial pressure.

More State Housing Routs

In previous newsletters we have highlighted that some state housing tenants have been subletting their state houses while living elsewhere. There is another rout going on - some state house tenants are subletting part of their houses while they still live there or are taking in flat mates or borders, according to documents tabled in the house by National MP, Phil Heatley. A state house tenant just should not be in a property with extra bedrooms. They should be moved to accommodation that suits their needs and the bigger property should go to a larger family. Housing New Zealand must clean up its act

London Property Market Still Strong

As discussed in our newsletter a fortnight ago house prices have risen by 12.2% across the country for the year ending June 2007. Our house prices are not rising in isolation. In the prime sectors of London (areas such as Knightsbridge and Belgrave), prices have risen on average by 33% for the same period. This is three times faster than the rest of the UK market. According to estate agents Knight Frank, the prime Central London residential property index, shows that up-market flats and penthouses have an average value of 2.5m pounds (NZ$6.75 million) and houses have a value closer to 5 million pounds. The reason for this extraordinary growth is the continued influx of wealthy Western European, Russian and Middle Eastern people. The London City economy is performing well and large bonuses are continuing to be paid in the financial and property sectors.

A New Product for our Investors

Our subsidiary company, General Finance Limited is launching monthly income debentures for its investors. In the past, the only option for investors has to be paid on a quarterly basis, but we are aware that some investors would like to receive their interest more frequently - a bit like a pension or annuity payment. Our monthly income debentures offer this choice. Everything remains the same with our monthly option, except that investors will not be able to compound their payments, they will paid out to your bank account on a monthly basis. We welcome your enquiries.

Our current mortgage interest rates are as follows:

Variable rate 10.20%

No Financials Home Loan 10.80

Jumbo Loan 10.20

One-year fixed rate 9.75
Two-year fixed rate 9.54
Three-year fixed rate 9.39
Five-year fixed rate 9.42

Line of credit facility 10.05



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