BORROWERS Mortgage Commentary 03 / 2011
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Issue 2011 / 3   11 March 2011

Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website

The Money Market
This morning (9am on 11 March 2011) the money markets were at the following levels:
Official cash rate    2.50% (down from 3.00%)
90 day bill rate       2.67 (down from 2.92)
1 year swap rate    2.86 (down from 3.00)
3 year swap rate    3.74 (down from 3.85)
10 year bond rate   5.62 (up from 5.55)
Kiwi dollar         0.7375 (down from 0.7475) 

Bollard Follows Our Advice
In our last newsletter, dated 25 February 2011, we suggested that lowering the official cash rate was more urgent than ever, not only because of the events in Christchurch, but due to the fact that the economy is stalling. Finally the Governor of the Reserve Bank, Mr Bollard, yesterday has lowered the OCR by half a percent from 3.0% to 2.5%. This is the same level as in the depths of the global financial crisis in 2008-9. This further indicates we are in a double dip recession. The main reason given was that the Christchurch earthquake will have a negative impact on economic activity for at least the remainder of the year. There are likely to be numerous benefits of this rate reduction.  This action has been anticipated over the past week and our currency has weakened benefiting our exporting sector. Floating rate mortgages dropped by half a percent immediately. It may start to restore some confidence in our economy as the person in the street can finally realise that the Reserve Bank is listening to them at last. 

We are better than the Aussies
There is now a marked difference between interest rates here and those across the Tasman. For once our rates are lower. Our floating rates range from 5.6% to 6.0%, whereas in Australia they range from 7.0% to 7.8%.  Similarly our one year fixed rates are all around 6% where as across the Tasman they are around 1% higher. Our three year rates are similar - they are 6.90% -7.25% compared with the mid 7% over there.  Our low floating rates are expected to remain at these levels for the rest of the year. This is all good news for those with mortgages. 

Housing Market
House prices across the country, according to Quotable Value, have posted small decreases in all regions. The average price New Zealand wide has dropped by 1.7% to $411,712 from February 2010 to February 2011. The regions with the smallest drops were Auckland -0.41% to $549,474, Nelson at - 0.1% to $459,278 and Napier at -0.5% to $346,221. The regions to show the highest declines were Hamilton at -3.9% to $337,946, Palmerston North at -3.6% to $292,206 and Wellington at -2.7% to $459,278. This is not unexpected as we are in a recession and the qualifying criteria for a home loan are currently reasonably strict. Predictions for this year are that we will expect to see a similar trend over the next 12 months. 

More on Checking Your Insurance
In our last newsletter, we suggested that everyone reassess and update, if necessary, their house and contents insurance to ensure it meets their requirements.  Once this is done, you need to look at your other insurances such as life, trauma and disability.  If you are self employed and have your own business, do you have the appropriate insurances for your working environment?  Have you insured your stock, for instance, if you have a shop?  Do you have keyman insurance in place? The living standards of many people in Christchurch now depend on the adequacy of their insurance. This is a timely reminder to review, not only your house and contents insurance, but all others as well, or to at least consider them. If you have any questions or concerns or just want some advice, now is the time to contact your insurance advisor or company.

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 General Finance Limited Loan Administration Department.

As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.

General Finance Limited is a Registered Financial Services Provider, with registration number  FSP8882.