Cairns Lockie Mortgage Commentary
Issue 2007 / 13 3 August 2007
Welcome to the thirteenth fortnightly Cairns Lockie Mortgage Commentary for 2007. We aim to keep you informed on
developments at Cairns Lockie, Home Loans 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 3 August 2007) the money markets were at the
following levels:
Official cash rate 8.25% (up from 8.00)
90 day bill rate 8.58 (up from 8.50)
1 year swap rate 8.61 (up from 8.59)
3 year swap rate 8.27 (down from 8.34)
10 year bond rate 6.53 (down from 6.86)
Kiwi dollar 0.7633 (down from 0.7932)
Home Affordability
According to a recent report from credit rating agency, Fitch Ratings, New Zealand's households are the most vulnerable
in the OCED to housing, income and interest rate shocks. This is fairly obvious as we have the highest interest rates in
the developed world. If our mortgage rates were at the levels of Europe, 5% or the UK, 6 -7% then we would be at no more
risk than the rest of the world. It was good to see that NZ based economic research group BERL, criticising the Governor
of our Reserve Bank saying there is not an inflation problem in this country, there is no justification in hiking
interest rates and so putting our households, manufacturing and exporting sectors under further financial pressure.
More State Housing Routs
In previous newsletters we have highlighted that some state housing tenants have been subletting their state houses
while living elsewhere. There is another rout going on - some state house tenants are subletting part of their houses
while they still live there or are taking in flat mates or borders, according to documents tabled in the house by
National MP, Phil Heatley. A state house tenant just should not be in a property with extra bedrooms. They should be
moved to accommodation that suits their needs and the bigger property should go to a larger family. Housing New Zealand
must clean up its act
London Property Market Still Strong
As discussed in our newsletter a fortnight ago house prices have risen by 12.2% across the country for the year ending
June 2007. Our house prices are not rising in isolation. In the prime sectors of London (areas such as Knightsbridge and
Belgrave), prices have risen on average by 33% for the same period. This is three times faster than the rest of the UK
market. According to estate agents Knight Frank, the prime Central London residential property index, shows that
up-market flats and penthouses have an average value of 2.5m pounds (NZ$6.75 million) and houses have a value closer to
5 million pounds. The reason for this extraordinary growth is the continued influx of wealthy Western European, Russian
and Middle Eastern people. The London City economy is performing well and large bonuses are continuing to be paid in the
financial and property sectors.
A New Product for our Investors
Our subsidiary company, General Finance Limited is launching monthly income debentures for its investors. In the past,
the only option for investors has to be paid on a quarterly basis, but we are aware that some investors would like to
receive their interest more frequently - a bit like a pension or annuity payment. Our monthly income debentures offer
this choice. Everything remains the same with our monthly option, except that investors will not be able to compound
their payments, they will paid out to your bank account on a monthly basis. We welcome your enquiries.
Our current mortgage interest rates are as follows:
Variable rate 10.20%
No Financials Home Loan 10.80
Jumbo Loan 10.20
One-year fixed rate 9.75
Two-year fixed rate 9.54
Three-year fixed rate 9.39
Five-year fixed rate 9.42
Line of credit facility 10.05
ENDS
Website http://www.emortgage.co.nz