Cairns Lockie Mortgage Commentary
Issue 2010 / 2 26 February 2010
Welcome to the second 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 (8am on 26 February 2010) the money markets
were at the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.73 (down from 2.77)
1 year swap rate 3.36 (down from 3.48)
3 year swap rate 4.63 (down from 4.76)
10 year bond rate 5.82 (down from 5.87)
Kiwi dollar 0.6902 (down from 0.6980)
House Sales in January
House sale volumes in January were unusually low with only 3,666
dwellings being sold. There has only been one other month since
1992 (when electronic records began) when house sales have
fallen below the 4,000 figure. The reason for this has not
really been addressed except by saying it was a holiday period
and the weather has been good. We believe these figures go
deeper than this and the Government’s talk on all sort of taxes
on the property sector has scared a number of people away. The
last thing we require is Government uncertainty on how it will
tax this important area. The property sector has an important
role in providing employment and wealth creation for the
country. We believe there should be no changes and we should
just let the recovery of this sector continue.
Decline in the Non-Bank Sector
One of the serious consequences of the international credit
crunch is the reduction in the number of non-bank lenders. The
large banks were all well supported by the Government at the
height of the credit crisis and in this part of the world they
have all survived and prospered. The non-bank sector includes
the mortgage trusts, mortgage originators, the mortgage broking
sector, finance companies and building societies. This group
targeted a relatively small sector of the market, but did
provide alternative sources of finance. As a result, in the
current market, a number of people just cannot obtain finance,
which means a number of new houses cannot be built or businesses
funded. This is bad for those concerned and it affects the
wider economy as well, with fewer jobs being created and less
tax being paid. It is important for an economy to have an
active non-bank sector and our Government must make moves
towards this objective.
More on the Proposed Tax Changes - Ring
Fencing
One of the tax proposals being discussed by the Government is
that property losses may be ring fenced. What does this mean?
It means that property losses can still be claimed but they can
only be offset against other property profits. This is fine if
you have other cash flow producing properties but most investors
do not. At the moment property losses can be offset against any
other forms of income. Another alternative that existed until
the mid 1980s, was a fixed amount (it was $10,000) of losses
that could be offset against your income. Additional losses just
accumulated to be offset in subsequent years. Ring fencing,
with or without a limit attached, is being considered by the
Government. The final outcome will be known in the budget which
is due in May this year.
Interest Rates
The Reserve Bank has made comments that any increases in
wholesale interest rates are unlikely to occur before June this
year. Some commentators had been predicting that these may have
started as early as March. We believe this is unlikely and in
fact interest rates may stay lower longer than previously
expected. There are several reasons for this - unemployment is
higher than forecasted, inflation is currently not a problem,
and the housing market is still in recovery mode. This is good
news for those with mortgages and for the wider economy ensuring
our recovery does not stall.
New Brokers
Over the past couple of months we have been updating our broker
database from various sources, together with your email details.
This may be the first fortnightly newsletter you have received.
If you do not wish to receive any future newsletters then you
can unsubscribe by clicking on the link at the bottom of this
newsletter. Otherwise we look forward to communicating and
updating you with our news.
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.
