Cairns Lockie Mortgage Commentary
Issue 2009 / 20 6 November 2009
Welcome to the twentieth fortnightly Cairns
Lockie Mortgage Commentary for 2009. 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 6 November 2009) the money markets were at
the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.80 (up from 2.77%)
1 year swap rate 3.45 (down from 3.65)
3 year swap rate 5.03 (down from 5.22)
10 year bond rate 6.03 (down from 6.05)
Kiwi dollar 0.7212 (down from 0.7508)
Rate Rise Across the Tasman
Earlier this week the Reserve Bank of Australia increased their
overnight cash rate by 0.25% from 3.25% to 3.50%. This was on
top of a previous increase of 0.25% the month before. As a
result floating rates are expected to increase by this amount
across Australia. We are now in an unusual situation where our
overnight cash rate is a full 1.0% lower than that in Australia
at 2.5%. This is most uncommon, as wholesale rates for most of
the last twenty years have been lower in Australia than here.
The reasons for this appear to be that Australia is coming out
of the recession faster than us. As the world economy improves,
the demand for Australian minerals will continue to improve and
this sector is a dominant export earner. The Governor of our
Reserve Bank has said our overnight cash rate is expected to
remain at current levels for at least the next six months.
Mortgage Fraud a Real Problem
Borrowers often ask lenders why they require so much
information, original documents, independent valuations and two
forms of identity. There are two main reasons; lenders have to
be clearly able to identify who they are lending to and
secondly, it has to do with fraud. Mortgage fraud is continuing
to increase at serious rates. In order to counter act this,
lenders are doing more checks, such as employment, valuation and
obtaining original documents. It is much easier to forge or to
change copies but harder with originals. Giving a lender more
information is just part of the funding process.
Housing Shortage Likely
In our last newsletter we discussed that immigration was up for
the year and that this is generally viewed as positive for the
country. But it leads to another issue – how do we house the
migrants. Due to the demise of much of the finance company
sector, who were active in funding residential housing
construction, fewer dwellings are being built. The NZ Property
Investors Federation believes that we need to build 20,000 new
dwellings a year, but currently only 7,000 are being built. The
number of new housing consents, which peaked at 27,000 a couple
of years ago, has now declined to around 14,000 for this year.
The most likely effect of this, and exactly what the Reserve
Bank does not want to see, is that house prices will increase
over the short and median terms.
What are Corporate Trustees?
There is growing trend to use family trusts to structure one’s
affairs. For most trusts, the trustees are the settlors, with
independent trustees being either a lawyer or an accountant. An
alternative to this is to use a corporate trustee which is a
limited liability company. This company may be the like of NZ
Guardian Trust or the Public Trust who acts as trustees for a
large number of trusts or a single purpose company which has
been specially set up to act as a trustee for your trust. There
are both advantages and disadvantages in using a corporate
trustee company. It is most important to obtain independent
legal advice when forming a trust and to discuss with your legal
adviser who the appropriate trustee or trustees should be.
Mortgage Interest Rates
For updated mortgage interest rates, either for new business
or applicable to your existing loan, please contact your Lender
or the Cairns Lockie Limited Loan Administration Department.
