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Cairns Lockie Commentary

Issue 13 23 July 1999

Welcome to the lucky thirteenth issue of the Cairns Lockie Mortgage Commentary. This is a fortnightly electronic newsletter which aims to keep you informed on developments at Cairns Lockie, Mortgage Bankers and the mortgage market in general.

Previous issues of this commentary (and soon, a mortgage calculator) can be found on our website www.emortgage.co.nz

The Money Market

This morning (8am on 23 July) the money markets are at the following levels:

Official cash rate 4.50%

90 day bill 4.72

1 year swap rate 5.19

3 year swap rate 6.40

10 year bond 6.55

Kiwi dollar 0.5290

Should You Fix or Float!

Over the past few years we have had an inverse yield curve in New Zealand where fixed rates were lower than floating rates. Borrowers took advantage of this differential and fixed their mortgages. With many of these fixed terms now maturing we are getting a number of enquiries from borrowers who need to decide whether to fix again or stay floating.

The yield curve is now positive. The Cairns Lockie floating rate is 5.85%, whereas our five-year fixed rate is 8.15%; a difference of 2.30%. Borrower currently seem more inclined to capture this differential and stay floating. The exception is where individual circumstances require the certainty associated with a fixed rate.

The inverse yield curve is an unusual situation. In most countries, with relatively free capital markets, short-term rates are lower than the longer-term rates. New Zealand is likely to have a positive yield curve over the next few years. We understand that, in Australia which has a positive yield curve for some time, most new home loans are being written on floating rates.

Property Rates: How Does Your City Council Compare?

In the press recently, there has been a lot of discussion on property rates and how they are increasing. Some of our clients have asked, how do their property rates compare with other centres. The average rates were recently published by Evening Post in Wellington. They are

$

Auckland City 1,426

Christchurch City 810

Dunedin City 1,111

Hamilton City 1,083

Hutt City 1,368

Invercargill City 917

Kapiti Coast 1,227

Manakau City 1,328

Napier City 1,035

North Shore City 1,383

Palmerston North 1,161

Porirua City 1,535

Tauranga City 1,171

Upper Hut City 1,267

Waitakere City 1,490

Wellington City 994

The above figures include regional rates, with adjustments for water, wastewater and rubbish collection where these are charged separately.

No Slow Down in Inner City Apartment Market

The inner city Auckland apartment continues to grow. At December 1998 there were approximately 4,000 completed units in the city. The apartment market has grown at an average rate of 98.5% per annum, equating to just over 739 apartments per annum. Over the next two years the total number of inner city apartments is forecast to increase to over 5,600. This equates to a 41% increase in total apartment numbers over a two-year period. (Source-Bayleys Research)

Electronic Banking in Scandinavia

In Scandinavia, the world’s highest penetration of mobile telephones and internet usage has contributed to sophisticated electronic banking services. The Swedish lender SEB has 20% of its retail client base using the internet. Sweden’s largest lender Svenska Handelsbanken has 140,000 internet customers and is adding 10,000 customers a month. The only service not available over the internet is lending. At Cairns Lockie, while we are not adding 10,000 customers per month (yet), we DO offer internet lending. To see how, visit us at www.emortgage.co.nz

Our current interest rates are as follows

Variable rate 5.85%

Two-year fixed rate 7.05

Three-year fixed rate 7.55

Five-year fixed rate 8.15

Line of credit facility 6.25

Equity accelerator 6.25

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