Cairns Lockie Mortgage Commentary 18 July 2008

Cairns Lockie Mortgage Commentary

Issue 2008 / 12 18 July 2008

Welcome to the twelfth fortnightly Cairns Lockie Mortgage Commentary for 2008. 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 (8 am on 18 July 2008) the money markets were at the following levels:

Official cash rate 8.25% (unchanged)
90 day bill rate 8.46 (down from 8.63)
1 year swap rate 7.99 (down from 8.20)
3 year swap rate 7.48 (down from 7.69)
10 year bond rate 6.02 (down from 6.34)
Kiwi dollar 0.7720 (up from 0.7600)

Interest Rates and Inflation

Next Thursday, the Governor of our Reserve Bank will release his next policy statement and review the official cash rate. Clearly most people can see that the economy is slowing down, retail sales are off, the residential property market has slowed right down, some businesses are now shedding labour - this is the time to start dropping our interest rates. There is one major bugbear out there, inflation. It is now way outside the 2-3% policy guidelines with the latest figure at 4% and in the short term it may even rise a bit more. This alone is enough to prevent further rate decreases until inflation eases back. Given all the negative factors discussed above, market consensus is that there is about a 50/50 chance that there will be a rate decrease next Thursday. An easing of interest rates would be welcome by all those with mortgages.

Property Sales

Residential house sales continue to decline. In May this year 4,372 dwellings were sold across the country and in June it was 4,305. In June last year the figure was 7,474, according to the Real Estate Institute of NZ. On average, it now takes 53 days to sell a property, nearly double the time it took two years ago. The median house price over the past year has changed surprisingly little. For June the national median house price was $340,000, down slightly on June last year at $347,500 and still ahead of June 2006 when it was $310,000. Estate agents are confirming the market is slow. They say first home buyers are holding back, hoping for further falls and investors are staying on the sidelines as they cannot make their deals work given the current high mortgages interest rates.

Post Codes

As from 1 July this year all mail being addressed within this country will require a 4 digit postcode. NZ Post has confirmed that mail without post codes included may face delays. If your address contains a common name, such as "Beach Road", a post code makes this particular street in your area unique and avoids misdelivering of mail. Posts codes are common in virtually all advanced overseas counties. To find out your post code or that of the person you are writing to, go to www.nzpost.co.nz and select the Postcode Finder from the menu on the left.

Lo Doc Lending

Lo Doc lending has proved popular in this country. It gives the self employed, who have traditionally found it more difficult to borrow, the opportunity to purchase their own homes and build up rental property portfolios. They are able to do this by self declaring their incomes. At Cairns Lockie we are still offering our popular 80% Lo Doc product. We also offer a No Doc 70% product where the borrower has only to certify that they can afford the loan. Many lenders have restricted their Lo Doc lending but our clients and introducers should be aware we have not. Lo Doc and No Doc lending continue to be a popular part of our mortgage offerings. We look forward of being of assistance.

Our current mortgage interest rates are as follows:

Variable rate 10.65%

Lo Doc Home Loan 11.55

One-year fixed rate 9.78
Two-year fixed rate 9.44
Three-year fixed rate 9.44
Five-year fixed rate 9.79

Line of credit facility 10.75

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

ENDS

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