Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2010 / 11 2 July 2010

Welcome to the eleventh fortnightly Cairns Lockie Mortgage Commentary for 2010. 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 (9am on 2 July 2010) the money markets were at the following levels:

Official cash rate 2.75% (unchanged)
90 day bill rate 3.20 (up from 3.10)
1 year swap rate 3.69 (down from 3.76)
3 year swap rate 4.37 (down from 4.61)
10 year bond rate 5.36 (down from 5.52)
Kiwi dollar 0.6900 (down from 0.7050)

House Buying Tip

An increasing number of houses are now owned via trust structures. There are advantages and disadvantages with these structures. If a property is going to be owned by a trust, then at settlement time all trustees must be available to sign the transfer and mortgage documents. If you have three trustees, all must sign. If one is at another location (for example on holiday or unavailable for whatever reason) and unable to sign, then the settlement will not occur. If you are planning to purchase a property and the trustees are all in different towns, settlement can still occur on due date but it requires a little bit more time and some planning. You need to allow time to have documents couriered and then returned. Your trustees need to be involved in transactions with trust assets.

What Assets Can a Trust Own?

Any asset can be held in trust. As trusts are often set up for asset protection purposes they most often own assets likely to appreciate in value, such as houses, baches, shares, other investment assets, art works and collectables. They do not normally own assets that depreciate such as cars, consumer chattels, clothing etc. The logic for this is if you are gifting $27,000 per year for a single person or $54,000 for a couple there is little point in gifting depreciating assets because after a period of time, these assets are going to be have little or no value. On the other hand if you are gifting assets such as a house which is rising in value then any capital appreciation accrues to the trust. If you are gifting art works or collectables to a trust, you may need to obtain valuations and an inventory record will have to be maintained. Again this needs to be discussed with your trust advisor.

Do Third Mortgages Exist?

The answer is yes but they are rare now. You can register as many mortgages as you like but what is the point if they do not have any value. Thirty or forty years ago third mortgages were much more common as finance was more difficult to obtain and borrowers had to go to all sorts of different sources to cobble together enough funds to purchase a property. Today even second mortgages are becoming rarer, they are now the domain of a few finance companies providing consumer type loans. Third mortgages now are a thing of the past and second mortgages are heading that way.

We Have Funds to Lend

Our associated company, General Finance Limited currently has funds to lend. The finance company sector has been considerably reduced over the past 24 months but we are still here. We are happy to look at bridging and short term first mortgage residential proposals. We go up to a loan to valuation ratio of 70%. We are still looking at "Lo Doc" proposals here. It is hard to finance these short term proposals as the traditional banks are not that keen. We would welcome your enquiry.

Mortgage Interest Rates

For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the Cairns Lockie Limited Loan Administration Department (below).

ENDS

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