Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2007 / 22 7 December 2007

Welcome to the twenty-second and final 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 http://www.emortgage.co.nz/newsletters.htm

The Money Market

This morning (8 am on 7 December 2007) the money markets were at the following levels:

Official cash rate 8.25% (unchanged)
90 day bill rate 8.89 (up from 8.71)
1 year swap rate 8.85 (up from 8.76)
3 year swap rate 8.46 (up from 8.39)
10 year bond rate 6.44 (up from 6.23)
Kiwi dollar 0.7777 (up from 0.7515)

Now We Are Nine

2007 has been another active year for us. This year, unlike previous ones, has been split into two parts. The first part of the year was similar to previous years, with strong lending volumes, an active housing market, and with all mortgage lenders widening their lending parameters. The second part of the year, beginning in August, saw the first impacts of the overseas credit squeeze and its ramifications hit our market. This has seen lenders tightening up on their criteria, and non-conforming and higher dollar mortgages becoming more difficult to obtain. Finance company lending, except for a few, has dried up. Mortgage rates continue to remain high. At Cairns Lockie we have continued working on product innovation, including a Cash Flow mortgage and an Asset Lend 70 product. We have added a new wholesale mortgage funder, which will give us greater funding diversity. On top of this we have moved to new premises which are bigger and brighter so we can continue to grow in 2008.

Our 2008 Crystal Ball

Most commentators are predicting a slower year in 2008 than in 2007. There are a number of both positive and negative factors on the horizon. Interest rates are expected to remain at these higher levels for longer than previously thought. The housing market has peaked and already house sale volumes have slowed and the number of days to sell has increased. It is getting more difficult to obtain finance for such projects as residential section subdivisions and spec building development. On the positive side, we continue to have low unemployment, which in itself creates housing demand, and an election next year which may see some Government stimulus of the economy. On balance we expect to see a slower year than 2007 and a more subdued housing market. The boom years of 2004/5 are well and truly behind us.

Interest Rates Across the Tasman

From time to time we update you with what is happening with mortgage rates across the Tasman. They are going up - there has been four interest rate rises in the past four months but they are still below ours. Their two year fixed rates range from 8.0% to 8.4%, compared with ours, ranging around from 9.25% to 9.90%. Unlike here, most mortgages written across the Tasman are at floating rates. Their floating rates range from 7.85% to 8.60%. They are still well below ours at around 10.55%. Australia still has lower mortgage rates than we do, but further rate rises are expected, in the near term, across the Tasman.

Deposit Funds

Our finance company, General Finance, is always interested in receiving deposit funds. All funds are lent on first and second residential mortgages only. We are one of the few finance companies in the country that lends solely on residential securities. The funds in this vehicle are used for short term bridging purposes. Our benchmark rate is 10.15% for two years for a minimum investment of $5,000. If you or any of your associates wish to invest, please do not hesitate to contact us on 09 526 7801 for a prospectus and investment statement.

As this will be our last newsletter for the year, we wish everyone a Merry Christmas and a safe and Happy New Year. Our next newsletter will be on 15 February 2008.

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 10.08
Two-year fixed rate 9.64
Three-year fixed rate 9.44
Five-year fixed rate 9.49

Line of credit facility 10.30

Regards
William Cairns
James Lockie

ENDS

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