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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2010 / 21 19 November 2010

Welcome to the twenty-first fortnightly Cairns Lockie Mortgage Commentary for 2010. 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 (9am on 19 November 2010) the money markets were at the following levels:

Official cash rate 3.00% (unchanged)
90 day bill rate 3.16 (down from 3.18)
1 year swap rate 3.55 (down from 3.60)
3 year swap rate 4.35 (up from 4.30)
10 year bond rate 5.60 (up from 5.32)
Kiwi dollar 0.7730 (down from 0.7840)

Lower Our Interest Rates Now

In this country we currently have relatively high unemployment, the Government is spending more than it is taking in taxes, we are still in a recession and yet our currency is continuing to appreciate, in particular against the Pound, Euro and the US dollar. Currently our dollar is trading in the 77-79 cents range, up on last year which everyone thought was high at 74 cents. According to the BNZ, our ten year average against the US dollar is 59 cents. This high exchange rate is hurting our export industries, where this country derives most of its income. There is still a mechanism that the Reserve Bank can use to try and lower our currency and that is to cut our official cash rate (OCR) from its current 3% to say 2%. This may make our currency less desirable to hold and therefore allows it to depreciate. Another positive benefit of this action is that it would cause floating rate mortgages to decrease, which will greatly help those with houses to pay off.

Wealth Accumulation

New Zealand is about to abolish gift duty. We do not have estate or death taxes, stamp duty or a capital gains tax. Australia has gift and stamp duty and a capital gains tax. European countries tend to have estate duties and some, such as France, have a specific wealth taxes levied against property, working much like an additional land rates charge. Our judicial system works well and we have a stable financial system. New Zealand should therefore be an ideal country for its citizens to save and increase their wealth, yet our savings rate is low. Admittedly, being in a recession and with KiwiSaver, this is prompting a few more people to start saving or reduce their indebtedness. It should be noted that countries with high savings rates, such as Singapore, Norway, Germany and France tend to be wealthier than those that do not save. One way to increase our wealth and catch up some more with Australia, is to boost our savings. This can be done through the likes of KiwiSaver or may be through tax incentives such as your first $1,000 of interest or dividend income is tax free. We did have this until the early 1980's, but the threshold was only $200. A few incentives to save may, in ten years or so, really assist to increase the wealth of this country.

Good Place to Live

Over the past couple of years a number of international surveys, including those completed by the United Nations, have commented that one of the top five cities and countries in which to live is, Auckland, New Zealand. Wellington was recently rated as one of the top four capital cities to visit by travel promoter, the Lonely Planet. There are several reasons for this – a relatively high life expectancy of 80.6 years, acceptable levels of education, and a reasonable standard of living. A positive aspect of these surveys is that our ranking has been improving over the past twenty years. Australia does rank above us, but only marginally. We should view this as positive but still concentrate on some issues that will improve our well-being further such as, better and safer roading, more public transport in our cities, faster internet and broadband services, increased levels of policing and less regulation so we can actively encourage more businesses to be established here.

Depositing Funds with Us

General Finance Limited was registered as financial service provider, on 23 September 2010, on the new FSP Register, providing a deposit taking service and providing credit under credit contracts. See We receive money from the public to fund our finance company. We do offer an attractive interest rate of 9.25% for three years. In order to receive funds we have issued a prospectus. We are the first in New Zealand, we believe, with our prospectus to include a benchmarking analysis based ASIC benchmarks which is mandatory for all Australian issuers of unlisted debentures. These benchmarks compare our finance company on eight criteria such as equity and liquidity ratios and other important issues like related party transactions. We believe these benchmarks greatly assist the general public in assessing a finance company. If you are thinking of investing with us we urge you to look at this information. We note this week that the National Business Review, a weekly financial journal, did an internet article about our benchmarking which we considered was positive.

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).

William Cairns
James Lockie


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