BORROWERS Mortgage Commentary 21 / 2012
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Issue 2012 / 21   23 November 2012

Welcome to the twenty-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 evening (3.30 pm on 22 November 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.63 (unchanged)
1 year swap rate    2.57 (up from 2.56)
3 year swap rate    2.80 (up from 2.76)
10 year bond rate   3.27 (down from 3.50)
Kiwi dollar         0.8165 (down from 0.8182)

Ross Asset Management
Last week we saw Wellington based fund manager, Ross Asset Management, collapse. This is serious, as it reportedly had around $450 million under management. Several people will be losing big time over this unfortunate event, which appears to be a ponzi type scheme. What is concerning about this collapse, in a time of heightened financial regulation, is that this company appears to have been operating unsupervised by the regulator. Deposit taking companies, such as ourselves, are heavily regulated, with a trustee, twice yearly independent audits, quarterly Reserve Bank reporting, an annual prospectus (extended semi-annually) and an investment statement.  In addition, we are subject to a number of prudential requirements including capital, liquidity and governance. The fund manager concerned had none of these. It begs the question, how could a company such as this operate under the new regime? Fund / asset managers must be brought under the same sort of regulation that applies to finance companies.

Interest Rates
On 6 December 2012 the Governor of the Reserve Bank will review our interest rate settings. Due to an increase in unemployment, a slowing in retail sales and low inflation, we believe it is time to cut rates. This would likely reduce our high dollar, which would assist exporter as well as those borrowing money, whether to purchase a house or to expand their businesses. It would signal that the Reserve Bank is concerned with our rather slow economy. The Governor is new to the job, so next month’s OCR review should give us a good indication of how he is thinking. Hopefully he cuts.

Million Dollar Houses
The housing market always receives considerable attention in the press. Over the past year the housing market has been active in a number of selected suburbs in Auckland. We tend to hear a bit about million dollar homes. Just exactly how many are there? According to Quotable Value (QV) there are around 40,000 houses in this country with council valuations of over a million dollars. There are 4,600 streets in this country with at least one house worth over a million dollars. Over time, as we invest more in our properties, this will only continue.

Asset Lends
We are still doing traditional asset lends, where we are happy to lend up to 70% on residential property. The reasons for these loans vary, but include reasons such as bridging, cleansing and no financial loans. We are happy to consider most locations around the country. We will look at both lifestyle and rural blocks. The later are just larger lifestyle blocks, more than ten hectares in size. We are happy with both these types of securities.

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.