Cairns Lockie Mortgage Commentary

Issue 2000/22 17 November 2000

Welcome to the twenty-second 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 evening (5pm on 16 November) the money markets were at the following levels:

Official cash rate 6.50% (unchanged from last fortnight) 90 day bill rate 6.66 (up from 6.65) 1 year swap rate 6.84 (down from 6.96) 3 year swap rate 7.04 (down from 7.16) 10 year bond rate 6.60 (down from 6.70) Kiwi dollar 0.3998 (up from 0.3945)

Cairns Lockie Launch Quick Start Home Loan at 7.75%

The pre-Christmas sales have started. We have decided to join in. From Monday 20 November we are having a mortgage sale. For those new borrowers looking for a home loan, we are offering, for a limited time only, our Quick Start Home Loan. This is a one-year fixed rate loan at 7.75%. We believe this is the lowest rate in the market. Cairns Lockie has been a leader, on a number of occasions, in the development of new products and rates. The Quick Start Home Loan is a continuation of this process. We have until recently been working on our internet services and can now boast that we have one of the finest internet banking services in this country. Now we are going to spend a bit of time on product development. The Quick Start Homer Loan is the first of these. BE QUICK!

Dealing With Debt

The traditional view is that once you have mortgage, you slowly pay it off over a twenty-five year period. This is not today's view. Although a mortgage is a financial obligation of the borrower, it can be made to work for you. There are several ways to do this:

a) You can consolidate all your other debt, such as credit cards and hire purchase, so you only have one debt payment to make, and you obtain the benefit of ow interest rates. Borrowing on first mortgage is still the cheapest form of borrowing.

b) If you are purchasing investment assets such as a rental property or a business, in many cases, you can add this to your existing mortgage, and this can be tax effective.

c) Our floating rate mortgages offer full flexibility. If you receive, say a tax refund or a bonus from work, you can simply use this to reduce your mortgage obligations. With redraw facilities you can redraw this back when or if you require it.

We believe that if you manage your mortgage properly, you can save many thousand of dollars. To assist you further we have published on our internet site an article on "20 different ways to save money on your mortgage". This can be found at http://emortgage.co.nz/save.htm

Things Look Brighter in Spring

A recent ASB Bank survey has shown that returns in the residential investment property market have stabilised and a little confidence is returning to the market. We have noted an increase in mortgage enquiries over the past month. Our clients also appear to be regaining some confidence in the stability of interest rates. This year we have seen a degree of political uncertainty, a rapidly falling dollar and severe fuel price increases. All through this, our interest rates have remained remarkable stable. Let's hope they remain this way, and we see a continuing increase of interest in the property sector.

An Update on Australian Mortgage Rates

From time to time we provide a summary of mortgage rates across the Tasman. Some of our clients have properties in Australia, while others are considering purchasing in the near future. The most obvious aspect of the Australian mortgage scene is the varied number of lenders which include, credit unions, building societies, regional banks, mortgage companies and of course the high street banks.

Floating rates range from a low of 7.49% through to 8.39%. The range is greater than in New Zealand, but many of the lower-rate floating-rate products across the Tasman are in fact no-frills type products. All you are getting is a lower rate and none of the extra benefits such as redraw facilities. This product differentiation will occur here, over the coming year. The fixed rates also have a wider range than they do in New Zealand. The three-year fix rates range from 7.65% to 8.20%. In conclusion the floating rates are around 0.75% below ours and the three year fixed rate about 0.5% cheaper.

Our current mortgage interest rates are as follows

Variable rate 8.25%

Quick Start Home Loan 7.75 (new) One-year fixed rate 8.10 Two-year fixed rate 8.10 Three-year fixed rate 8.20 Five-year fixed rate 8.35

Line of credit facility 8.60

Regards William Cairns James Lockie

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