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Cairns Lockie Mortgage Commentary 6 June 2008

Cairns Lockie Mortgage Commentary

Issue 2008 / 9 6 June 2008

Welcome to the eighth 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 6 June 2008) the money markets were at the following levels:

Official cash rate 8.25% (unchanged)
90 day bill rate 8.66 (down from 8.71)
1 year swap rate 8.25 (down from 8.50)
3 year swap rate 7.60 (down from 7.85)
10 year bond rate 6.35 (down from 6.60)
Kiwi dollar 0.7660 (down from 0.7833)

Official Cash Rate (OCR)

Yesterday the Reserve Bank announced that it was leaving the official cash rate unaltered at its current levels of 8.25%. The comments made by the Governor were interesting. He acknowledged that the economy is slowing, together with the housing market, but he gave the biggest indication that the housing market had peaked and rates may well start easing as soon as September. The financial markets greeted this as good news, the swap rates dropped by 20 basis points and the exchange rate eased. The share market was in positive territory unlike most of the bourses from around the world. The good news is that mortgage rates have peaked but on the negative side there is unlikely to be much easing this year.

Rental Levels

One area of the housing market that is not bearish is the rental market. Property managers are commenting that, despite the slowing economy, residential rentals are rising. Some people may say that this is due to landlords trying to recover their higher mortgage costs. This is not really true as landlords can only charge what the market can bear. If there are a lot of flats available and few prospective tenants, rentals will fall regardless of interest rates. Crocker Property Management, based in Auckland, in their April's report, confirms that rents are rising. They confirm that the average rental for a two bedroom flat or apartment is now $333 per week - the highest the firm has recorded. For a three bedroom house the average rental is now $440 per week.

Apartment Market

According to Bayleys Research a total of 770 new apartments were added to the Auckland CDB last year taking the total stock to 17,537. An analysis of these apartments shows that 76% were used for residential purposes, 15% serviced and 9% dedicated to student accommodation. There are a further 910 new units likely to released to the market this year. The numbers of inner city apartments in Auckland grew quickly particularly in the years fro 1997 to 2004 and has slowed right down. The demand for apartments in the inner city continues to be firm due to such things as rising fuel prices, longer travel times, traffic congestion and the increasing number of people (not just the young) who wish to live in the inner city.

Easier Processing

Before lenders will advance mortgage funds, they are now paying stricter attention to the ability of a borrower to be able to make repayments of the loan. For wage and salary earners all you need to do is to provide is two or three recent pay slips. If your company does not provide them, then three months bank statement showing the funds going in to your bank account will be sufficient. For the self-employed things are a little bit more difficult. This means having your latest financial accounts ready. The key here is if you know you are going to borrow in the next few months, now is the time to see your accountant and get your accounts organised. This will save you time and extra work when you are applying for mortgage funds.

Our current mortgage interest rates are as follows:

Variable rate 10.65%

Lo Doc Home Loan 11.55

Jumbo Loan 10.65

One-year fixed rate 9.98
Two-year fixed rate 9.79
Three-year fixed rate 9.84
Five-year fixed rate 10.04

Line of credit facility 10.75

William Cairns
James Lockie

Cairns Lockie Limited
638 Great South Road, Ellerslie, Auckland
PO Box 74-212, Market Road, Auckland
Telephone (09) 526 2000
Facsimile (09) 579 7795


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