Cairns Lockie Mortgage Commentary
Issue 2004/4
Welcome to the fourth Cairns Lockie Mortgage Commentary for 2004. 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 (9am on 19 March 2004) the money markets were at the following levels:
Official cash rate 5.25% (unchanged)
90 day bill rate 5.53 (down from 5.64)
1 year swap rate 5.61 (down from 5.85)
3 year swap rate 5.88 (down from 6.16)
10 year bond rate 5.71 (down from 5.91)
Kiwi dollar 0.6535 (down from 0.6677)
What is Really Happening with House Prices?
Conflicting media reports over the state of the housing market paint a confusing picture for home buyers. Several
statements have been made over the likely effects of rising mortgage rates, slowing immigration, lower auction clearance
rates and a softening in rentals. This is not the whole story. December and January are quieter months for real estate
activity, due to the holiday period. Total house sales for the country reached a high figure of 9,940 for February 2004.
This was up from 8,404 in January, and higher than the same month in the previous year (9,624) and up on February 2002
(8,733). Agents are continuing to report a firm demand for most property types. Interest rates did not rise this month
and may not again this year. Slower immigration will affect the rental market particularly in Auckland. We believe this
year will not be as strong as last year, but overall will be an acceptable year for the residential property owner.
Mortgage Rate Outlook
Many in the mortgage market will have noticed that fixed rate mortgage rates have eased, by up to a third of a percent
in the past fortnight. This is due to several factors, including the Reserve Bank not increasing the Official Cash Rate
last week when the market thought that it may. More importantly, there probably will not be any further rate rises this
year. The inflation outlook is likely to be around, an acceptable, 2.0% and our currency has eased back from its highs
in February. This suggests we may see some stability in mortgage rates for the rest of the year.
Kiwibank Result
Kiwibank has recently released its six monthly unaudited result to the end of December, showing a loss of $2.06 million
before tax. This result is interesting as it raises a number of questions * The result includes other operating revenue
of $26.78 million, made up of banking and lending fee revenue of only $7.71 million plus agency services fee revenue of
$19.07 million from a related party, NZ Post. If this related party revenue had not been included, a loss of $21.13
million would have resulted. The public needs more details on how this other revenue fits into a lending operation. Is
there is any fudging of the banks result with that of NZ Post? * Operating expenses of $37.15 million were recorded. Why
was the amount this large given interest and operating revenue of only $54.86 million, a home loan book of $791 million
and a paid up capital of only $102 million? * Given that it is operating with mortgage rates way below that of its
competitors why is its growth not more? * Has the Government subsidised "In Reach 100%" programme been successful?
Remember the End of the Tax Year
In less than a fortnight the tax year ends. For those looking at taking out, restructuring or refinancing their mortgage
there are now only nine working days counting today to complete their transaction within the current financial year.
Those clients to whom we have issued loan proposals and wish to settle their mortgages within this tax year must get
them back to us sooner rather than later. Everyone's tax position is slightly different but there are often cashflow and
timing advantages in completing a transaction this financial year rather than waiting a further 12 months.
Our current mortgage interest rates are as follows
Variable rate 7.15%
No Financials Home Loan 8.15
Jumbo Loan 7.15
Quick Start Home Loan 6.55
One-year fixed rate 6.86
Two-year fixed rate 7.02
Three-year fixed rate 7.19
Five-year fixed rate 7.31
Line of credit facility 7.25
Regards William Cairns James Lockie