BORROWERS Mortgage Commentary 07 / 2012
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Issue 2012 / 7   11 May 2012

Welcome to the seventh 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 afternoon (4pm on 10 May 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.62 (down from 2.70)
1 year swap rate    2.48 (down from 2.65)
3 year swap rate    2.73 (down from 2.95)
10 year bond rate   3.57 (down from 3.84)
Kiwi dollar         0.7848 (down from 0.8160)

Australian Budget
Last week the overnight cash rate in Australia was reduced from 4.25% to 3.75% because of the slowing economy. Mortgage rates have fallen as a result. Earlier this week Australia released their Budget which gave some benefits to the average Australian. The Treasurer said he was passing on some of the gains from the mining boom. Company superannuation contributions were increased to 12% and there are tax decreases for incomes up to $80,000. Our Budget will be presented later this month - it is unlikely to pass on any benefits to the average consumer.  What we need here is some radical economic reforms just to keep up with Australia. A relatively positive Budget across the Tasman and a negative one here will do nothing to stop those Kiwis from moving across the ditch.

Mortgage Rates May Go Lower
Australia, last week, lowered its overnight cash rate and mortgage decreases followed. Our Reserve Bank has stated that our exchange rate is too high, our Government will not meet their fiscal targets, inflation is subdued and our unemployment is slowly rising. As we have stated previously, our Reserve Bank should decrease interest rates further, which would assist those with mortgages, as well as the export sector via a lower exchange rate. This is unlikely to ignite the housing market. A small portion of the market is active and appreciating, but this is confined to the inner Auckland suburbs.  The rest of the country can only be described as stable. Christchurch is a bit of an exception. Let’s hope our Reserve Bank follows their Australian counterpart.

Changing Nature of Inner Auckland
Back in the 1980s, inner city Auckland, outside working hours and before seven day trading, was pretty much a ghost town. People worked in the city but all lived outside it. In 1991 there were 1,200 people living in the CBD - now there is over ten times this number.  We expect continued growth, particularly when the Wynyard Quarter is developed. Most of the people choosing to live in the city, tend to be younger, mobile and childless, but this likely to change. Older people, once their children have left home, are also starting look at this market. Inner city living is ideal for those that travel a lot, as it is much easier to lock up an apartment on the sixth floor and leave it, compared with a house in the suburbs. As a result apartments will become an increasingly important part of our overall housing stock.

Buying a Business
We are providing short term and bridging finance. Our lending parameters are wide, provided we have some form of residential security. We are seeing a number of people wishing to purchase their own businesses. If a business does not show previously acceptable cash flows, but does have potential, many mainstream lenders will not advance funds. In these cases we will, and we will not be looking at taking a charge over the business.  

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.