Cairns Lockie Mortgage Commentary

Issue 2000/20 20 Oct 2000

Welcome to the twentieth issue of the Cairns Lockie Mortgage Commentary for 2000. 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 can be found on our website http://www.emortgage.co.nz/newsletters.htm

The Money Market

This morning (8pm on 20 October) the money markets were at the following levels:

Official cash rate 6.50% (unchanged from last fortnight)
90 day bill rate 6.65 (down from 6.68)
1 year swap rate 6.96 (down from 7.01) 3 year swap rate 7.16 (up from 7.12)
10 year bond rate 6.70 (down from 6.76)
Kiwi dollar 0.3945 (down from 0.4048)

Moving House? - Check This Out

Ever moved house and had to advise everyone you have ever dealt with of your new address? Want a simpler way? Check out a new service from http://www.changemyaddress.co.nz . This site allows those moving from one home to another, to advise their new address to banks, telephone companies, insurance companies, and mortgage providers to name a few. It also offers good advice on how to plan your move. It is aimed at not only home owners but those who are renting as well. It is an interesting site and is well worth a look.

No Spring Spurge, Volumes Down, Prices Firm

This best way to summarise the residential property market at the moment is,"no spring surge, sales volumes lower than previous months and prices remaining firm". The volume of sales for September was the lowest for any month this year. New Zealand wide there were 5,071 sales compared with 5,489 in the previous month (and 6,293 in September last year). This certainly indicates that we are not experiencing the traditional spring surge. Despite this gloomy news, house prices have been remarkable stable. The median house price for the country was $173,000 for September compared with $170,000 for the previous year. In Auckland the trend was much the same, with the median price being $242,000 compared with $240,000 a year ago.

Why Have Mortgage Rates Been So Steady?

Over the past six months we have seen huge movements in the currency, changing commodity prices (oil and beef to name two) and the likelihood of rising inflation. Why have interest rates remained so steady? We believe there are several reasons:

1) The move by the Reserve Bank to adopt the OCR (overnight cash rate) regime replacing the MCI (monetary conditions index). The OCR is set by the Reserve Bank and is currently reviewed every two months. This establishes a bench mark for all interest rates. The MCI linked interest rate movements to currency changes, amongst other things. In New Zealand, being a small commodity dependent economy, with at best mediocre economic performance, it is reasonable to expect the currency to be quite volatile. This is indeed what has been happening. The OCR does offer us the likelihood of more stable interest rate environment.

2) Economic growth is expected to be slow over the next few months, business confidence is low and employment growth is static. These factors are contributing to a damping effect on interest rates.

3) Several commentators are expecting an increase in inflation next year. This should put upwards pressure on interest rates. However this inflation expectation does not appear to being factored into current interest rates.

Our current mortgage interest rates are as follows

Variable rate 8.25%
One-year fixed rate 8.10 (down)
Two-year fixed rate 8.20 Three-year fixed rate 8.25 (down)
Five-year fixed rate 8.35 (down)
Line of credit facility 8.60

Regards William Cairns James Lockie

Cairns Lockie Limited PO Box 74-212, Market Road, Auckland Telephone (09) 525 9711 Facsimile (09) 579 7795 Website http://www.emortgage.co.nz

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