BORROWERS Mortgage Commentary 22 / 2011
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Issue 2011 / 22   2 December 2011

Welcome to the twenty-second (and last) 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. 

 The Money Market
This morning (9 am on 2 December 2011) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.73 (up from 2.64%)
1 year swap rate    2.74 (up from 2.60)
3 year swap rate    3.08 (up from 2.95)
10 year bond rate   4.07 (up from 3.88)
Kiwi dollar         0.7760 (up from 0.7647) 

2011 in Summary
This current year is similar in many ways to 2009. We are still in recession despite what a number of politicians may be saying.  The demand for finance has been slow.  On a couple of occasions, when we have seen signs of improvement in our economy, events overseas such as the slow American economy and sovereign debt issues in Europe have causes abrupt downturns in world share markets and any confidence quickly evaporated. Our soft commodities, such as dairying, are performing well but some of the benefits have been negated by our strong dollar. This is hurting a number of exporting companies. The Rugby World Cup, although the result was good, failed to provide the economic stimulus that many had hoped for. We end the year on a more positive note, the general election is over and a stable Government can be formed.

A Great Place to Live
It was pleasing to see some positive news released. According to the Mercer 2011 Quality of Living Survey, Auckland was ranked third out of a total of 212 cities, as the best place in the world to live. The two above us were Vienna in Austria and Zurich in Switzerland. Vancouver, which is another favourite, was ranked at number five. The top Australian city was Sydney ranked at number eleven. Wellington came in at a respectable thirteenth. The survey is based on a number of criteria - economic and social factors and others such as access to beaches and parks. The survey noted that Auckland was the country’s commercial capital. And it has a number of characteristics that you would expect in an international city.

We have highlighted this issue in a number of previous newsletters.  House, and home and contents insurance are continuing to become more difficult to obtain. We do not expect this to change and it will become more expensive. When purchasing a new property, talk to your insurance advisor at the beginning of the process. Insurance companies are asking far more questions and requesting more information such as electrical certificates confirming the wiring is up to standard. The earlier you get on to this, the more time you have to attend to any issues which may arise. The practice of arranging insurance on settlement day is now over.

2012 Crystal Ball
It is always difficult to predict the next twelve months but we believe certain trends are emerging. Interest rates and mortgages are likely to remain at their current levels.  They will only increase when economic activity starts to improve, unemployment falls and consumer spending increases. Unemployment is likely to remain at these levels, largely due to restructuring and less new employment in Government departments. The Government has few levers to pull to cut expenditure but one of them is to cut back on the number of civil servants. There will be some additional spending with rebuilding in Christchurch which will be positive for the economy. The sovereign debt issues in Europe will continue to dominate the international economic news. Overall we believe that 2012 will be slight better than this year although we are likely to remain in recession.  

As this is our last newsletter for the 2011, we wish everyone a Merry Christmas and a happy New Year. Our next newsletter will be on 17 February 2012. We appreciated your support this year and look forward to your continued support in 2012.

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.