Cairns Lockie Mortgage Commentary
Issue 2003/19
Welcome to the nineteenth Cairns Lockie Mortgage Commentary for 2003. 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 (10am on 17 October 2003) the money markets were at the following levels:
Official cash rate 5.00% (unchanged)
90 day bill rate 5.20 (up from 5.17)
1 year swap rate 5.50 (up from 5.37)
3 year swap rate 6.20 (up from 5.83)
10 year bond rate 6.15 (up from 5.75)
Kiwi dollar 0.5940 (down from 0.5990)
Low Inflation - What Does It Mean for Mortgages?
Earlier this week the Reserve Bank released the third quarter CPI figure which showed that inflation during the quarter
was 0.5%, considerably lower than the 0.8% expected. This leaves the annual inflation rate at 1.5%. Given that our
inflation rate is consistently low, and our Official Cash Rate at 5.0% is one of the highest in the OCED, the rational
position for the Governor of the Reserve Bank would be to lower the OCR. The market however feels this is most unlikely
citing the strong residential property market and robust retail sales.
Mortgage Rates in America - A Comparison with NZ
The Official Cash Rate in the USA is under 1% - but are their mortgage rates really low as well? Surprising this is not
the case. They are however lower than our mortgage rates. In the USA by far the greatest majority of mortgages are
fixed, for either 15 or 30 years. Floating rate mortgages, which are common in NZ and Australia, are not so in USA.
Fifteen-year fixed rate mortgages range from around 4.25% to 4.85% and thirty-year fixed rate mortgage range from 5.25%
to about 6.00%. On average they are 2.0 - 2.5% lower than our rates in NZ.
Why Settle on a Friday
There is a tradition in the mortgage industry that mortgages settle on a Friday. The only rationale for this is that it
gives you the weekend to assist with your move. Borrowers should be aware that they can settle on any business day.
There are a number of advantages in settling your mortgage on a day other than a Friday. If something unexpected
happens, such as there is found to be a caveat on your title, a trust is purchasing and you need all the trustees
present, or your insurance company wants to inspect the property as it is a hundred year old villa, then say settling on
a Thursday gives you that extra day up your sleeve. Solicitors, removal people, and mortgage lenders are all busiest on
a Friday, so settling on another day may give you more time with these people and an extra day should something
unforeseen happen.
Second Mortgages - There is a Place for Them
Amongst the many mortgage services we offer, we are seeing a growing demand for second mortgages. Why is there a need
for second mortgages if lenders can lend up to 90 - 95% on a property? Some of our second mortgage borrowers have used
them where they have been involved in a one off project such as buying a business and they want keep this entirely
separate from their main mortgage. Others, with difficulty in confirming income, use a second mortgage where the first
mortgagee will only lend a certain amount and the borrower requires more. Still others use seconds for a short term
need, to save disturbing their first mortgage relationship. If you are considering a second mortgage please do not
hesitate to contact us.
Our current mortgage interest rates are as follows
Variable rate 6.75%
No Financials Home Loan 7.75
Jumbo Loan 6.75
Quick Start Home Loan 6.40 (new)
One-year fixed rate 6.71 (new)
Two-year fixed rate 6.12 (new)
Three-year fixed rate 7.34 (new)
Five-year fixed rate 7.51 (new)
Line of credit facility 6.85