Lundy was not arrested immediately after Christine and 7-year-old Amber were found bludgeoned to death in their Palmerston North home, as police gathered evidence.
His brother Craig told the High Court at Wellington the defendant made a series of "spontaneous" disclosures four days after the killings.
"He told us that he had got a bottle of rum and drunk about half the bottle. He was celebrating; I assumed it was a work-related thing," Mr Lundy said.
"Later that night he had called a prostitute and had used one on four occasions prior to that."
Lundy called the visit from the hooker "a cashie".
The witness said he had no idea about the infidelities.
However, he had heard about issues with the Lundys' physical relationship.
"He mentioned that once they found out they couldn't have children, Christine went off sex and it was up to three months without having sex," he said.
On the same day, Lundy informed his brother he had "bumped up" his and his wife's life insurance policy from $200,000 to $500,000 in the weeks before the deaths.
He was concerned it would not take effect because he had not paid any premium but the witness reassured him if he had signed, it would be processed.
Lundy was also under the impression the life insurance would see his mortgage paid off.
Earlier, Mrs Lundy's brother Clive Weggery told the court he had never seen a tomahawk or small axe among the defendant's tools.
Lundy's lawyer David Hislop, QC, suggested there may have been tools left in the house at the time of the killings because the defendant was redecorating one of the rooms.
But Mr Weggery was adamant all tools would have been returned to the garage once the job was finished.
Earlier, the court heard how Lundy talked about bankruptcy and told friends his wife was not sleeping in the weeks leading up to the alleged murder.
The Crown says Lundy was under severe financial pressure over a Hawkes Bay winery investment and hacked to death his wife Christine and their 7-year-old daughter Amber at their Palmerston North home on August 30, 2000.
Mrs Lundy's sister-in-law Maria Norrelle said the defendant had been trying to secure investment in his vineyard venture but people - including an uncle in Queensland - had pulled out.
"The last time I remember it being discussed was late at night. Mark mentioned that Christine wasn't sleeping well but he wasn't worried about it," Ms Norrelle said.
"He used the word bankrupt."
The witness said Lundy was "extremely optimistic" about the venture but would not discuss it in front of his wife.
There was also discussion in court of Lundy's drinking habits.
"We had a couple of conversations which was unusual for Christine to talk to me. She wanted to change their lifestyle," Ms Norrelle said.
"She was concerned about the cost of partying and the influence it would have on Amber. She had said she wanted Mark to give up drinking for three months to see if he could."
A silver bracelet was found in Lundy's car when police searched it but no witnesses so far have recognised it as belonging to Mrs Lundy or Amber.
Ms Norrelle said after the alleged murders she and her husband were chatting with the defendant.
"He said that bracelet was found in the car and he believed it had fallen out of Christine's handbag when they went to a conference in Hamilton the week before," she said.
The High Court at Wellington is expected to hear from other family members this morning who will give evidence about the couple's relationship.
The trial before Justice Simon France is expected to last nine weeks.
By Rob Kidd of NZME. News Service
