BORROWERS Mortgage Commentary 13 / 2012
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Issue 2012 / 13   3 August 2012

Welcome to the thirteenth 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 3 August 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.64 (down from 2.67)
1 year swap rate    2.69 (up from 2.55)
3 year swap rate    2.96 (up from 2.80)
10 year bond rate   3.42 (up from 3.18)
Kiwi dollar         0.8090 (up from 0.8030)

A Tenant in Your Own Home
Over the next week or two houseowners across Auckland will be receiving their new rates bills and water accounts from the greater Auckland City Council.  Many are looking at substantial increases of up to 10% for their rates and higher amounts for their water and wastewater accounts.  The council has also signalled that for some people, there will be further significant rate rises next year and the year after. In all cities there are older people living on fixed incomes, younger people trying to establish themselves (often with student loans) and lower income families with multiple financial commitments. These council increases are well ahead of our inflation rate.  We have the situation where retired people are paying around 25% of their pensions to cover just their rates and water bills. When council services reach these levels, you are reducing a number of people to becoming tenants in their own homes.  This is a shocking situation.  Councils, just as families and small business are currently doing, must aim to reduce their costs.

More Land Not the Answer
Several commentators are saving that to alleviate the housing crisis, particularly in Auckland, more land should be made available. This is not quite the answer, as it costs a lot to develop new subdivisions and often they involve long commuter drives to the place of work. The answer involves using the existing land more effectively. An example where this is happening is in Sydney, with medium sized developments. This is where we allow two and three story flats and apartments to be built in certain areas. Instead of a single dwelling you may have up to six flats or apartments.  Medium density uses land more efficiently and does not have the drawbacks of a large scale high rise developments.

There is Not a Property Boom
Anyone looking at the Auckland papers would think we are in the midst of a property boom. We are not.  Certain inner city suburbs are seeing prices rise due to a shortage of supply and rising demand in these areas. Outside central Auckland, which is by far a much larger area (including the North Shore, Henderson and Manakau) it is just business as usual.  Properties are selling more quickly but prices are basically stable.  For first home buyers, inner city Auckland is out of reach, with the exception of the apartment market. There are still good buying opportunities in parts of the North Shore, southern part of the city and the Henderson areas. 

We Are a Deposit Taker
Our company is not just a lender but we are also a deposit taker. This means that we can accept money from the public. We offer competitive rates: 8.00% for two years and 8.05% for three years.  These are considerably better rates than what the banks are offering. If you would like to invest, please call us for a copy of our new prospectus or look at our website.

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.