Cairns Lockie Mortgage Commentary
Issue 2000/23 1 December 2000
Welcome to the twenty-third 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 30 November) the money markets were at the following levels:
Official cash rate 6.50% (unchanged from last fortnight) 90 day bill rate 6.69 (up from 6.66) 1 year swap
rate 6.84 (unchanged) 3 year swap rate 6.95 (down from 7.04) 10 year bond rate 6.36 (down from 6.60) Kiwi
dollar 0.4045 (up from 0.3998)
Housing Market Update
The ASB Bank Survey of Housing for the three months to October showed an improvement in confidence in the housing
sector. Nationally 34% of the participants thought it was a good time to buy. This compares with 28% for the May - July
quarter. The report also noted that we have not seen the traditional spring surge in increasing housing sale volumes.
Prices also appear to have stabilised. The report noted that the building industry with increasing cost pressures,
together with the slower economy should reduce the effect of any over supply. At Cairns Lockie we are seeing an increase
in activity. People are starting to make decisions, and we welcome the increased enquiry from people wishing to
refinance away from their banks.
Competition Between Banks and Non-banks
This time, a year ago, our floating rate was three quarters of a percent below the banks. Currently this advantage has
narrowed to 0.25%. A couple of our borrowers have asked why is this. The main reason is due to competition. Our
competitors have sharpened their rates and trimmed their, larger than necessary, margins. This has occurred in other
industries as well. A good example is the oil industry. When Challenge entered the petrol retailing market, they were up
to 5 cents per litre cheaper than some of their competitors. Their competitors then improved their efficiencies and
trimmed their margins? Today there is, at the most, a 1 cent difference between the new player and the established
petrol retailers. Despite the pricing differential narrowing, this increase in competition has still brought positive
gains to the consumer, both with choice and lower rates. We are pleased to have been a catalyst for competition.
Which Way Will the OCR Go Next Wednesday?
On 6th December the Reserve Bank will review the Official Cash Rate. This has direct implications for mortgage rates.
The factors that may cause an increase are rising inflation, increased retail spending and rising wage rounds. Factors
that will keep the cash rates at their current levels include, slower than expected economic growth, and a generally
less robust economy. We have talked with a number of financial commentators and the consensus view is that the cash rate
will remain unchanged. The market, with the recent easing of the bond yields is saying the same thing. The next review
will be in February 2001.
Quicker Approvals
Everyone wants a quick answer when submitting a mortgage application to a lender. In a number of cases we have approved
loans in less than an hour. To obtain this sort of service the onus rests, not with the lender, but with the applicant.
If you have all the relevant information available, then a decision can be made quickly. The main thing slowing down
approvals is a lack of evidence to confirm income. If you are an employee, it is easy; we just need a couple of pay
slips. For the self employed it is equally easy; we require your accounts or your tax statements. Self-employed people
should not look on this as an onerous task, just to please a lender. Completing annual accounts in a timely fashion,
makes borrowing easier, clarifies your tax position and confirms how your business has gone in the past year. We look
forward to assisting you.
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