Cairns Lockie Mortgage Commentary
Cairns Lockie Mortgage Commentary
Issue 2009 / 14 14 August 2009
Welcome to the fourteenth fortnightly Cairns Lockie Mortgage Commentary for 2009. 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 afternoon (3pm on 13 August 2009) the money markets were at the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.80 (up from 2.79)
1 year swap rate 3.16 (up from 3.04)
3 year swap rate 4.87 (up from 4.66)
10 year bond rate 6.41 (up from 6.23)
Kiwi dollar 0.6716 (up from 0.6500)
Mortgage Rates Across the Tasman
With the overnight cash rate in Australia at 3.0% and ours at 2.5% you would expect mortgage rates to be the same or even a bit lower in this country. In fact the opposite is true. Trading banks floating rates range from 5.79% to 6.45% here, whereas in Australia they range from 5.50% to 5.90%. Similarly the two year fixed rates are around 6.55% whereas across the Tasman they range from 5.69% to 6.55%. Why are rates lower in Australia than here? There is a lot more competition in Australia from the likes of credit unions, mortgage mangers, building societies, smaller regional banks and so forth. A small premium is paid on our funds due to our country risk. The banks here may be obtaining larger margins. Our rates, compared with Australia should be lower. On a positive note the rates we are seeing now, were last seen in this country in the early 1970's.
Apartments, particularly those under 50 square metres, are not popular with lenders. Most are demanding at least a 35% deposit for those wishing to purchase a smaller apartment. This is forcing a number of first time home buyers to look in the suburbs, whereas many would prefer to live in the inner city, closer to their work, their social activities and their friends. The reason for lenders’ reluctance is that in Auckland the secondary market for apartments is still undeveloped (which is not the case in Wellington). Lenders are unaware which Auckland apartments will hold their value, appreciate or even depreciate in value. A few may even become inner city slums. We just do not know. As this market matures and the secondary market becomes more active, lending on apartments will become less restrictive. This may still take a further 3-4 years.
Rents are Easing Slightly
Recently driving around Auckland we are seeing more "To Let" signs outside residential properties. Normally, in a recession, vacancies increase as young flatters move back home, fewer people relocate for work purposes and immigration declines. So far, during this recession, the rental housing market has held up surprisingly well. First National group, a New Zealand wide real estate chain which manages thousands of properties, has said "NZ wide rents are down on average of 3.5% for the past three months". Vacancies have also increased. On the flip side, selling residential properties, many agents are reporting a shortage of listings with a decrease in selling times. Unlike other recessions which see a virtual standstill of all real estate activity, we still have a reasonably active market.
Making Your Home Warmer
As many already know the 2009 budget included significant funding for home owners wanting to upgrade their insulation and heating. It is also available to landlords wishing to upgrade their investment properties. It works fairly simply - the Energy Efficiency and Conversation Authority will pay up to a third of your costs to a maximum of $1,300 for both ceiling and underfloor insulation for properties built before 2000. Additional grants can be obtained for improved heating. As this applies to landlords it is well worth considering. We suggest that if you are planning to use this scheme, you had better apply sooner rather than later, before the Government changes the rules.
Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the Cairns Lockie Limited Loan Administration Department (below).