Cairns Lockie Mortgage Commentary
Issue 2007 / 10 22 June 2007
Welcome to the tenth fortnightly Cairns Lockie Mortgage Commentary for 2007. We aim 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 afternoon (3pm on 21 June 2007) the money markets were at the following levels:
Official cash rate 8.00% (unchanged)
90 day bill rate 8.36 (unchanged)
1 year swap rate 8.47 (down from 8.48)
3 year swap rate 8.29 (down from 8.31)
10 year bond rate 6.78 (up from 6.67)
Kiwi dollar 0.7626 (up from 0.7503)
What is Vendor Finance?
Vendor finance is where the owner of the property leaves in some funds, generally by way of a second mortgage for a
short period of time - from a few months up to two years. The vendor is normally trying to assist with the selling of
the property. The interest rate charged can range from nil% up to 15% but quite often can be at the first mortgage rate.
In the past, vendor finance was more common than it is now, due largely to the current buoyant property market where
most houses are selling reasonably quickly. It is a useful tool to assist a vendor with a sale, or a purchaser who may
find funding a property in the short term a bit more difficult. We expect vendor finance to be used more in the future.
Trust Management
An increasing number of people are using trusts to hold assets. By some estimates there may be 250,000 to 300,000 trusts
in existence in this country. One of the most important issues with trusts, is to ensure they are managed in the correct
manner. We welcome initiatives in trust education to assist trustees in this regard. Recently an interesting book has
been written by Mark Maxwell entitled "Trusts - A Kiwi Sham". The author focuses on getting the management of trusts
correct, so that if they are challenged, for example by a creditor or the IRD, they would be able to withstand this
challenge. This book is relevant and easy to read. It can be found in most bookshops at $29.55.
Diversify Your Lenders
Financial commentators suggest that share market investors should have diversification in their portfolios. We think
that the same should apply to property investors. If you are planning to purchase say four rental properties, it would
be advisable to have them all located in different suburbs. The principal of diversification should also apply to your
borrowing sources. We see situations where an individual owns a number of rental properties plus their own home and all
their borrowings are with the same lender. What happens if that lender, due to changes within the economy or with a
different view on New Zealand, changes its lending policy on rental properties or larger exposures? That lender may
become increasingly difficult to deal with. One solution is to diversify or increase your number of lenders. It would be
wise to consider a non-bank such as Cairns Lockie, that can offer an alternative to your main lender plus some enhanced
product features including full redraw facilities and ten years' interest only.
Our Deposit Rates are most attractive.
Our subsidiary company, General Finance Limited, is looking for deposits. It offers a range of terms to investors,
ranging from 6 months to 5 years. Our headline rate is for 2 years at 10.15%. There are special rates available for
deposits of over $50,000. We use your funds to provide short term bridging types of loans. All loans are secured by way
of first or second registered mortgages over residential real estate. We welcome your enquiries and support. Our new
prospectus will be available soon. If you would like one, please let us know.
Our current mortgage interest rates are as follows:
Variable rate 9.95%
No Financials Home Loan 10.55
Jumbo Loan 9.95
One-year fixed rate 9.56
Two-year fixed rate 9.40
Three-year fixed rate 9.40
Five-year fixed rate 9.32
Line of credit facility 10.05
Regards
William Cairns
James Lockie
ENDS
Website http://www.emortgage.co.nz