Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2007 / 11 6 July 2007

Welcome to the eleventh 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 morning (8am on 6 July 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 8.46 (down from 8.47) 3 year swap rate 8.26 (down from 8.29) 10 year bond rate 6.69 (down from 6.78) Kiwi dollar 0.7817 (up from 0.7626)

We Are Moving

After just over four years in our current premises we are moving again, to facilitate our expansion. We are moving one kilometre down the road to Level 1, 638 Great South Road, Ellerslie. We are pleased with our move as it will give us considerably more room and better areas for client service. All staff will retain their existing direct telephone numbers. Our main telephone number, our fax and email addresses remain the same. Our contact details are listed below. There is plenty of visitors' car parking available. We welcome your visit.

Tax Cuts Are Needed to Help Home Affordability

Recently, at a Parliamentary Select committee considering housing affordability, the Council of Trade Unions stated that the low rates of pay in this country were the reason that many people cannot afford to purchase a property. We disagree and believe there are two things that are making it difficult to purchase a home. The first is our ridiculously high mortgage rates - they are the highest in the western world. Secondly our high incidence of tax - in particular in the lower income ranges depriving many wage and salary earners of the ability to service a mortgage. If we substantially cut our mortgage rates to where they are in the USA, UK and Australia and raised our income tax thresholds then many more New Zealanders would be able to purchase their own home.

Tax Breaks For Rental Properties

Some people in the wider community are calling for the deductibility of interest, enjoyed by property investors, to be removed in order to slow down the housing market. This does not make any sense as these tax advantages do not just apply to property investors. The same advantages exist for those who borrow to buy shares in public listed companies, private companies or other income producing assets. It would be crazy to stop these tax deductions for just one sector, namely property investors, when a share investor or business purchaser can still use them. Most businesses, when purchasing assets, such as plant and equipment, vehicles, stock and premises do borrow to fund them, and claim a deduction on their interest component. Residential property investors are just one of many types of businesses borrowing money to purchase assets and claim the tax deductibility of their business costs.

Our High House Prices?

Recently the Economist newspaper in London calculated that the average house price in New Zealand had risen by 94% from 1997 to 2006. This is an average figure and there are wide variations within this figure. Many countries have had larger house price increases over this period - Ireland 252%, UK 192%, Spain 173% and Australia 132%. There were a number of countries lower that us, such as Canada 69%, Switzerland 16%, and Japan at minus 32% (a drop in house prices by a third). The increase in house prices in New Zealand is not out of context with the rest of the world.

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

Cairns Lockie Limited 638 Great South Road, Ellerslie, Auckland PO Box 74-212, Market Road, Auckland Telephone (09) 526 2000 Facsimile (09) 579 7795 Website http://www.emortgage.co.nz

Residential Mortgage Lenders:

William Cairns mailto:wcairns@emortgage.co.nz (ddi 09 526 7801) Glyn Slade mailto:gslade@emortgage.co.nz (ddi 09 526 7802) Paul Lange mailto:plange@emortgage.co.nz (ddi 09 526 7805) Kris Pedersen mailto:kpedersen@emortgage.co.nz (ddi 09 526 7812) Dean Picard mailto:dpicard@emortgage.co.nz (ddi 09 526 7818) Mandy Murphy mailto:mmurphy@emortgage.co.nz (ddi 09 526 7811) Tim Ferguson mailto:tferguson@emortgage.co.nz (ddi 04 477 9164)

Lending Support:

Estelle Carr mailto:ecarr@emortgage.co.nz (ddi 09 526 7803) Andie Marsh mailto:amarsh@emortgage.co.nz (ddi 09 526 7816) Maria Kabel mailto:mkabel@emortgage.co.nz (ddi 09 526 7806) Jill Mills mailto:jmills@emortgage.co.nz (ddi 09 526 7804) Richard Craven mailto:rcraven@emortgage.co.nz (ddi 09 526 7817)

Loan Administration:

Lorraine McRae mailto:lmcrae@emortgage.co.nz (ddi 09 526 7819) Lyn Everall mailto:leverall@emortgage.co.nz (ddi 09 526 7808) Tony Chappell mailto:tchappell@emortgage.co.nz (ddi 09 526 7813) Marilen Dixon mailto:mdixon@emortgage.co.nz (ddi 09 526 7814) Agnes Vasquez mailto:avasquez@emortgage.co.nz (ddi 09 526 7815) Liz Lancaster mailto:llancaster@emortgage.co.nz (ddi 09 526 7809) James Lockie mailto:jlockie@emortgage.co.nz (ddi 09 526 7800)

Customer Care and Loan Arrears:

Elsie Brooks mailto:ebrooks@emortgage.co.nz (ddi 09 526 7809) Karina Kayes mailto:kkayes@emortgage.co.nz (ddi 09 526 7809) Mandy Lavery mailto:mlavery@emortgage.co.nz (ddi 09 526 7809)

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As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.

Cairns Lockie Limited is not a Registered Bank.

ends

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