BORROWERS Mortgage Commentary 11 / 2012
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Issue 2012 / 11   6 July 2012

Welcome to the eleventh 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 6 July 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (unchanged)
1 year swap rate    2.74 (up from 2.64)
3 year swap rate    3.02 (up from 2.89)
10 year bond rate   3.43 (up from 3.29)
Kiwi dollar         0.8021 (up from 0.7967)

Share Market Debacle
In our previous newsletter we noted that various other investments have lost a considerable amount of money and we believe it not justifiable to be focussing only on the finance company sector. This time we will look at how our top blue chip shares have fared since 31 March 2007, the beginning of the global financial crisis.  The share price of Contact is down by 47%, Fisher and Paykel Healthcare by 44%, Fletcher Building by 47% and GPG by 80%. Even some of our better performers are down - Sky City by 25% and Sky TV by 11%. In defence of these shares, they have all paid dividends since 2007, and some have had attractive rights issues which would have reduced your losses. What this shows, is that if you had a portfolio of top NZ shares in March 2007 and held them, you have lost capital - collectively over $6 billion of market capitalisation has been lost (not including Telecom). It is even worse if you invested in some of our second line smaller shares.

Home Insulation
A considerable number of people have taken advantage of the Government’s incentives for its “Warm Up New Zealand” initiative, by insulating their homes.  Owners of rental properties should be aware that this applies to investment properties as well.  Landlords may obtain a better quality tenant if their properties have been insulated or even obtain a higher rental. If a tenant finds it is easier to heat their house, they well stay longer. Landlords should be aware that this scheme does apply to rental properties and it may well bring advantages to both the tenant and investor.

New Home Consents
Nationwide building consents declined in May. This includes the Christchurch earthquake related consents, which reached the second highest monthly total since September 2010. Apartment consents continue to decline and this can is confirmed with fewer cranes being visible around the major cities. Most of the new consents are concentrated in Auckland and Christchurch. This is unlikely to change in the foreseeable future. 

Rentals in Auckland
The rental market is tight in Auckland. Trying to find suitable accommodation in central Auckland is both time consuming and expensive. The main reason is that the supply of new dwellings is just not keeping pace with the demand. Anyone knows that it is relatively easy to borrow from a bank, if you wish to purchase your own home, but it is virtually impossible if you wish to build say four.  The population of Auckland continues to grow, which is adding to this situation. Any additional costs that landlords do incur, such as impending rate and insurance increases, can be passed directly on to the tenant in these circumstances. Until the above changes, there will continue to be upward pressure on rents. 

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.