BORROWERS Mortgage Commentary 01 / 2012
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Issue 2012 / 1   17 February 2012

Welcome to the first fortnightly General Finance Mortgage Commentary for 2012.  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 17 February 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.73 (unchanged)
1 year swap rate    2.76 (up from 2.74)
3 year swap rate    3.10 (up from 3.08)
10 year bond rate   3.96 (down from 4.07)
Kiwi dollar         0.8320 (up from 0.7760)

Auckland Housing Market
The good news for those that live in Auckland City and the North Shore areas, are that your housing prices have now passed their 2007 market peaks. Waitakere and Manukau areas are not far from reaching their previous peaks as well.  This has all occurred while the country has been in recession and the majority of the rest of the world have been having their economic problems as well.  The reasons for this are several, lack of supply of suitable building sites, the difficulty of builders and developers in obtaining second tier construction funding and the expanding of Auckland’s population. These issues will persist over the next few years and as a result Auckland house prices are likely to increase further.  

Investor Market
Our property investor clients are telling us that they are starting to look at the residential property market again. After the set back last year with the removal of depreciation on property and changes with loss attributing companies, our investors are saying that property prices may be starting to bottom.  Certainly this is the case in Auckland with interest rates expected to remain reasonably low and stable. The rental markets are fine as well.  We are expecting this to continue especially as the alternative investments, such as bank deposits, offer such a low return and the share market continues to be volatile. 

Interest Rates
So far this year we have seen a few downward movements in the prime fixed rates offered by the banks.  We are now in a situation where the one year and two rates are at or below the current floating rate. What this is telling us is that the current low mortgage rates are likely to stay at these levels for longer than was anticipated.  This time last year, a number of bank economists were predicting an increase in interest rates in either March or June 2011.  This turned out to be complete nonsense. Rates cannot rise while we are still in a recession, with higher than expected unemployment. Ask any small business person, how good business is.  Most will say not particularly good.  If our or the global economic situation gets any worse, we may well have more interest rate cuts.  In the last three months, Australia has cut their rates and may well do so again. We may follow suit. This would have the advantage on easing pressures on our exchange rate and assist in making things easier for our exporters.

Short Term Finance
We are continuing to have depositors placing funds with us. This means we have funds to lend.  We are currently lending funds through our finance company for bridging arrangements, low doc and asset lends.  We are happy to lend for a wide variety of purposes such as to those wanting to buy things including cars, boats or planes. We also provide funds for borrowers wishing to meet tax payments. Our main criterion is that we must have a residential or a residential /rural type security. We welcome your enquiries.

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.