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Cairns Lockie Newsletter for this week:

Cairns Lockie Mortgage Commentary

Issue 2004/17 17 Sept 2004

Welcome to the seventeenth Cairns Lockie Mortgage Commentary for 2004.
This is a fortnightly electronic newsletter, which aims 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 17 Sept 2004) the money markets were at the
following levels:

Official cash rate 6.25% (up from 6.00)
90 day bill rate 6.68 (up from 6.55)
1 year swap rate 6.75 (up from 6.66)
3 year swap rate 6.69 (up from 6.6
10 year bond rate 6.16 (down from 6.20)
Kiwi dollar 0.6586 (up from 0.6456)

Cairns Lockie Expands Product Range With Another Wholesale Funder

Cairns Lockie Limited is termed a non-bank lender as we rely on
wholesale providers for our funding. Twenty years ago a company such as
ours would have operated exactly like a Building Society, relying on
retail deposits. Today we use wholesale funders to give us access to the
depth of funding that only the wholesale market can provide. Our main
wholesale funder, to date, has been AMS (NZ) Limited an Australian
wholesale funder. From this week we have an additional funder, Origin
(NZ) Limited, a wholly owned subsidiary of the ANZ Bank. We welcome our
additional funder as it will enable us to add several new mortgage
products to our current range. It is our aim at Cairns Lockie to have
one of the most extensive ranges of residential mortgage offerings in
the market. We are nearly there and have some more developments coming.

What is New

With an additional wholesale funder on board, our product offering has
increased and this will be revealed over the next few weeks. Here are
" Our maximum exposure on a single dwelling was $750,000. We have
now increased this to $2,000,000 (or beyond depending on the
transaction). The borrower still has to show they can service that
" Increasing our exposure to individual borrowers over several
properties from around $1.0 -1.5 million to around $3.0 -3.5 million.
This is important as it enables us to advance more funds to a number of
our existing clients.
" Greater latitude to lend on a number of residential properties
including lifestyle blocks and inner city apartments.
We welcome your enquiries.

First Home Buyers Have It Tough

One of the unseen consequences of mortgage increases is that it is
making harder for first home buyers, particularly those with a single
income. Six months ago, a first home buyer was able to borrow at around
7.0%, but now the rate has increased to 8.5%. On a $200,000 mortgage for
a 25 year term, repayments will have increased around $200 per month. At
the same time houses over the past six months have not dropped in value,
they have actually increased, even in a higher interest rate
environment. The Governor of the Reserve Bank, in his move to slow the
economy, is actually hurting a group that wants to purchase an owner
occupied property. This group is not speculating on rental property,
they are not into excessive personal consumption as they are actually
saving their deposit, they are an unseen group, being hurt by rising
mortgage rates and house prices.

Depreciation Rules May Change

One of the tax advantages of owning residential rental properties is
that you can make tax deductible allowances for depreciation. Some are
arguing that given properties seldom drop in value, giving an allowance
for depreciation does not make a lot of sense. The rates applicable for
chattel depreciation for rental properties is similarly under review.
There is an opportunity for the public to have their say. We suggest
that concerned property investors make a submission to the Inland
Revenue. Submissions close on 30 September 2004. Depreciation is an
important issue with property investors. If a hard line is taken it may
reduce the numbers willing to invest in this area and may prevent some
landlords carrying out improvements, particularly to kitchen and
bathrooms which do depreciate over time.

Our current mortgage interest rates are as follows

Variable rate 8.15%

No Financials Home Loan 9.15

Jumbo Loan 8.15

Quick Start Home Loan 7.65

One-year fixed rate 7.96
Two-year fixed rate 7.87
Three-year fixed rate 7.94
Five-year fixed rate 7.96

Line of credit facility 8.25

William Cairns
James Lockie

Cairns Lockie Limited
321 Great South Road, Greenlane, Auckland
PO Box 74-212, Market Road, Auckland
Telephone (09 526 2000
Facsimile (09) 579 7795
Website http://www.emortgage.co.nz