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Cairns Lockie Mortgage Commentary 24 April 2008

Cairns Lockie Mortgage Commentary

Issue 2008 / 6 24 April 2008

Welcome to the sixth fortnightly Cairns Lockie Mortgage Commentary for 2008. 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 (8 am on 24 April 2008) the money markets were at the following levels:

Official cash rate 8.25% (unchanged)
90 day bill rate 8.92 (up from 8.86)
1 year swap rate 8.66 (down from 8.67)
3 year swap rate 7.93 (down from 8.01)
10 year bond rate 6.47 (down from 6.48)
Kiwi dollar 0.7965 (down from 0.8000)

Our Cash Rates

As was widely expected today, the Governor of the Reserve Bank, left the cash rate unchanged at 8.25% this morning. The reasons given were varied. On one side Dr Bollard said there had been sharp falls in consumer and business sentiment, the housing market was slower and the hot dry summer had weakened growth prospects. On the other side inflation remains high, the labour market is still strong and Government spending is remaining high. Inflation remains the big bogey. No hint was given as to when interest rates may be eased.

Mortgage Lending is Now Tougher

Borrowers of residential mortgage finance are seeing the lending criteria of all mortgage lenders, banks and mortgage insurers tighten. Loans that would have been approved automatically twelve months ago are now being routinely declined. Borrowers must become aware that the lending market has changed. Lenders have tightened up considerably on such products as 100% home loans, high LVR's on investment properties and lo doc loans. Lenders are asking for more documentation. Statement of positions must be completely filled out disclosing all debt. Bank statements are being requested, more questions are being asked about a borrower’s credit history. There are a considerable number of borrowers who obtained loans in the past year or so who would not qualify today. These borrowers must realise that the lending market has changed and they should strictly adhere to all the conditions of their loans.

A True Asset Lend (Now Better)

One part of the lo doc product suite that we still offer, and we are one of the few lenders in the market to do so, is a true No doc product. This is where a borrower only has to certify that they can afford a loan. Our No doc was restricted to 55%, but today we have increased this to 60% of the value of the property. Although this may seem to be restrictive, it still does appeal to a wide range of borrowers. Borrowers can be overseas based, have complex business affairs but they can also be salary or wage earners on PAYE. We are pleased to be able to improve this product.

Private Dwellings Increase

According to the latest census, done in 2006, the number of privately occupied dwellings was 1,471,746 up by 111,903 (8.2%) since the 2001 census. This figure was up by 195,414 (15.3%) over a ten year period. What is interesting is that around 12% of these dwellings were owned by family trusts, 55% by their occupants and the remaining 33% by other parties (including various types of landlords such as private, council and government ones). This confirms that approximately two out of three residential properties in this country are owned by their occupants. This is still down from around 74% in the early 1990's.

Our current mortgage interest rates are as follows:

Variable rate 10.40%

No Financials Home Loan 11.00

Jumbo Loan 10.40

One-year fixed rate 10.28
Two-year fixed rate 10.04
Three-year fixed rate 9.84
Five-year fixed rate 10.54

Line of credit facility 10.50

William Cairns
James Lockie


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