Cairns Lockie Mortgage Commentary 2 March 2007

Cairns Lockie Mortgage Commentary

Issue 2007 / 2 2 March 2007

Welcome to the second 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 2 March 2007) the money markets were at the following levels:

Official cash rate 7.25% (unchanged)
90 day bill rate 7.82 (up from 7.75)
1 year swap rate 7.94 (up from 7.93)
3 year swap rate 7.59 (unchanged)
10 year bond rate 5.92 (unchanged)
Kiwi dollar 0.6940 (unchanged)

Alternative Strategy for the Reserve Bank

Next week the Reserve Bank will review the Official Cash Rate (OCR). Over the past couple of years the Reserve Bank has been tightening monetary policy to such an extent that we have the highest interest rates in the Western world. But it does not seem to be working. Every time the Governor puts up interest rates, the currency goes up and those with mortgages merely switch from higher floating rates to cheaper long dated fixed rates. In the meantime real harm is being done to our economy. The exporters (our main creators of employment) are hurting. This is being seen in the current reporting season of our publicly listed companies such as Fisher and Paykel Appliances. It hurts those with large mortgages who tend to be first home buyers and young families. It stops some people from even purchasing a new home. On top of this it does not seem to be controlling inflation which is the Reserve Bank's primary responsibility. Maybe the Reserve Bank should actually cut its rates next week. It would have little effect on the mortgage sector, in the short term, but it would see our currency easing. This in turn would immediately assist our exporting sector and likely slow down imports benefiting our current account deficit. An interesting thought.

New Apartment Block on the North Shore

Those who travel or live on Auckland's North Shore will see a new tower block being built. It will be known as the Sentinel Tower and, with 30 levels and 117 apartments, it will be the largest building on the Shore. What is interesting, is that some of the apartments have already been sold - one for $1.5 and another for $1.3 million. Demand for them is said to be firm. The apartments will have fantastic views over the Gulf and Auckland Harbour.

Why We Like Real Estate

The Government has been making some noises that they would like the real estate market to dampen down. This is unlikely to happen as we believe there is a lack of other suitable investments available in this country. Shares have the disadvantage of volatility, as we have seen this week with the correction of the Chinese market , and the recent law change making investors pay a compulsory 5% dividend on offshore shares (except Australia) whether they receive a dividend or not. In New Zealand we have not had the privatisation or the private sector involvement in the utilities area, which we have seen, particularly in Australia, offering the Mum and Dad investors, a safe and reasonably high dividend stream. Even forestry, which has been popular with smaller investors, has an issue regarding carbon credits under the Kyoto agreement. As a result, surplus funds continue to go into the property sector - particularly residential.

Bridging Finance Available

We do offer bridging finance. Bridging finance is a short term accommodation for as little as a few days right up to 12 months. Most often it used to assist with the purchase of a new property when your current one has not yet been sold. It most cases the interest can be capitalised, making bridging attractive from a cash flow point of view. Please do not hesitate to contact us if you require more information.

Our current mortgage interest rates are as follows:

Variable rate 9.20%

No Financials Home Loan 9.80

Jumbo Loan 9.20

One-year fixed rate 8.98
Two-year fixed rate 8.65
Three-year fixed rate 8.58
Five-year fixed rate 8.26

Line of credit facility 9.30

Regards
William Cairns
James Lockie

ENDS

http://www.emortgage.co.nz

© Scoop Media